Insurance Claims Management in the Age of Climate Change

Climate change is no longer a future risk for insurers to model. It is a present operational reality producing record losses, destabilizing regional markets, and pushing carriers out of entire states. For claims organizations, the question is not whether losses keep rising. It is whether the claims operation is built for the volume that is already here.

This piece sets out what the published loss data says, and then what part of the problem sits on the claims side of the house. Those are two different things, and it is worth keeping them separate.

The numbers have become hard to ignore

In 2023 the National Oceanic and Atmospheric Administration recorded 28 separate weather and climate disasters each causing at least $1 billion in losses, a US record, surpassing the previous high of 22 set in 2020. Total losses reached at least $92.9 billion.

NOAA's Climate.gov analysis puts that in context: in the 1980s the US averaged 3.3 billion-dollar events a year. Across 2019 to 2023, the average was 20.4.

2024 was heavier. Munich Re put global insured losses from natural catastrophes at $140 billion, the third-highest year on record, against a ten-year average of $98 billion.

In the US alone, insured natural catastrophe losses reached $117 billion, exceeding the rolling ten-year average by 52%, according to the Yale Law Journal.

Swiss Re Institute noted that insured losses have now passed $100 billion for five consecutive years.

Then came 2025. Swiss Re Institute put insured losses from the Los Angeles wildfires alone at an estimated $40 billion, the largest wildfire loss event on record.

Aon put first-half 2025 global insured losses at $100 billion, 40% higher than the first half of 2024 and more than double the 21st-century average of $41 billion.

Verisk's 2025 Global Modeled Catastrophe Loss report put the global modeled average annual loss from natural catastrophes at $152 billion and rising.

Read together, that is not a cycle. It is a baseline. For claims teams the baseline translates into sustained high-volume operations, elevated loss adjustment expense, and continuous pressure on combined ratios.

Insurers are already exiting markets

The financial consequences are reshaping the competitive landscape now rather than later.

AM Best reported a $24.5 billion net underwriting loss for the US property and casualty market in the first half of 2023 alone, close to the full-year 2022 underwriting loss of $26.5 billion.

The reinsurance market reached a hard market inflection in 2023, with property catastrophe pricing rising sharply at the January renewal according to Fitch Ratings. Guy Carpenter reported loss-free US accounts generally up 20% to 50%, the steepest risk-adjusted rate increases in 17 years.

The consequences are most visible in Florida and California. State Farm and Allstate stopped writing new property policies in California, citing wildfire risk, construction cost increases, and reinsurance conditions, as recorded in the California Department of Insurance's own consumer alert. Farmers withdrew from Florida. Six Florida insurers were declared insolvent in 2022 alone.

As homeowners are dropped or face steep premium increases, many are priced out of coverage or out of the regions they have lived in for decades.

For carriers still writing in high-risk markets, the margin for operational inefficiency has narrowed. A claim handled slowly, disputed unnecessarily, or closed without accurate documentation raises loss adjustment expense and worsens the loss ratio, and there is less underwriting margin sitting behind it to absorb that than there used to be.

Where the claims side can actually move the number

Underwriting tightening, premium increases, and geographic withdrawal are all valid responses to climate risk. They are also slow, blunt, and politically contested. Claims handling is the lever with the shortest distance between action and financial effect.

Deloitte put paid losses combined with investigative and settlement expenses at approximately 76% of US premiums collected in 2022. When three quarters of premium runs through the claims function, a point of improvement there is worth more than a point almost anywhere else.

A claims platform contributes to that through several connected mechanisms:

Faster cycle times. A claim closed in days rather than weeks is a different financial and reputational event: less reserve duration, less litigation risk, less policyholder frustration.

Automated workflows. Data entry, document routing, and status updates come off the handler's desk, so experienced people spend their time on complex losses, coverage disputes, and negotiations.

Structured FNOL intake. Complete and correctly routed first-notice data removes the rework and back-end delay that incomplete intake creates.

Mobile field documentation. Structured photo evidence, damage notes, and coverage flags captured from the field, including in the low-connectivity conditions that follow a disaster.

Real-time visibility. A live view of open claims, adjuster workload, settlement velocity, and reserve adequacy, so decisions are made on current data rather than on last month's report. That is what claims oversight is for.

Individually each reduces cost. Together, on one platform, they compound.

A note on what this does not claim. None of that reduces catastrophe exposure, changes the weather, or substitutes for reinsurance and underwriting discipline. It changes what each claim costs to handle and how quickly the operation can see what it is carrying. Those are the questions a claims system answers, and they are the only ones it answers.

The surge problem is a separate problem

The broader loss trend comes with a surge problem that steady-state claims operations do not handle well. When a major hurricane, wildfire complex, or severe convective storm event strikes, insurers receive thousands of claims within a few days. The operational profile of a catastrophe response is categorically different from routine handling.

What a surge asks for that routine operation does not:

• Intake that scales without manual triage. Structured capture and automatic routing, because supervisors cannot hand-sort a surge.
• Rapid onboarding of temporary catastrophe staff, with access that expires when the deployment ends.
• Bulk routing and triage by peril type, severity, and geography.
• Broadcast policyholder communication, so status updates go out at volume and the call center is not the only channel.
• Audit-ready documentation, because post-event regulatory scrutiny has followed every major catastrophe in recent memory.

On the VCA platform, assignment rules route claims automatically by loss location, adjuster workload, or client, and a claim can be assigned to the team or handler closest to the loss.

What a surge response looks like when it fails is documented in detail in our case study on the claims response to Hurricane Ian.

Thunderstorms, hail, and the secondary peril problem

A common assumption is that climate-driven claims inflation is mainly a catastrophe event problem. The published data increasingly says otherwise.

Swiss Re reported that insured losses from severe thunderstorms alone reached a record $60 billion in 2023.

Verisk's 2025 report found that severe thunderstorms and other frequency perils now account for two-thirds of total modeled global insured property losses.

These are not named storms. They are the thousands of localized hail, wind, and thunderstorm events that occur across the continental US every year, each generating a modest individual loss and collectively overwhelming claims operations through sheer frequency.

For most carriers, that means the harder operational challenge is not the single headline event. It is the continuous stream of smaller ones, with no defined start and end date, which asks for throughput rather than crisis response: workflow automation, assignment efficiency, and fast settlement across the aggregate book.

TPAs and IA firms carry the same pressure

The climate claims picture is not only a carrier problem. TPAs and independent adjusting firms feel the same volume pressure, with the added complexity of multi-client operations and the reputational risk of being attached to a slow or disputed outcome.

For a TPA running programs across several carriers, TPA claims management software that scales across clients, with separate reporting and access controls per account, is the difference between a profitable catastrophe season and an operational crisis.

For IA firms, independent adjuster claims software that produces complete, defensible inspection records is not only an efficiency play. In an environment where carrier handling of post-catastrophe damage reports has drawn regulatory attention, documentation integrity is a commercial differentiator as well as a legal one.

The policyholder experience cannot be a casualty of volume

A subtler risk in high-volume claims environments is that speed and scale come at the expense of the policyholder. As carriers exit markets and premiums rise, retention has become a genuine strategic priority, and claims experience is the primary driver of churn.

InsuredConnect, VCA's policyholder self-service add-on, gives policyholders a route into the claim from their own device rather than through the call queue. The related argument, and the evidence behind it, is in why insurers must deliver a digital self-service claim experience.

Why waiting is the expensive option

The situation carriers face is not a slow-moving trend that leaves room for a multi-year modernization program. Losses are being generated now, combined ratios are under pressure now, and regulators are examining claims handling now.

VCA is built for claims operations that need to be live in weeks, beside the policy system they already run. Implementations complete in weeks, not years.

File handlers typically need 30 to 60 minutes of training.

It is also designed to run alongside what you already have rather than in place of it, with claim transactions reachable through VCA's APIs for a custom link to the client's ERP or general ledger.

If your organization is evaluating claims technology against rising catastrophe losses, request a demo and we will work through the specific pressure points on your book.

Frequently asked questions

How is climate change affecting claims operations?

Rising frequency and severity of weather-related loss events produce sustained high claim volumes that manual workflows handle badly. Carriers are seeing elevated combined ratios, higher loss adjustment expense, and more litigation. Claims technology addresses the handling cost and the visibility, not the exposure itself.

What is the connection between claims management and loss ratios?

The loss ratio is the share of premium paid out in claims, and it responds to how efficiently and accurately claims are handled. Faster cycle times reduce reserve duration and litigation risk, structured intake reduces rework, and automation lowers loss adjustment expense.

Why are insurers leaving Florida and California?

Both states have seen sustained underwriting losses driven by climate-related perils: hurricanes and flood surge in Florida, wildfires in California. Combined with litigation costs, particularly in Florida, and reinsurance pricing pressure, carriers have not been able to reach underwriting profitability at sustainable premium levels. Several have stopped writing new policies or left entirely.

What is a secondary peril and why does it matter?

Secondary perils are high-frequency, moderate-severity events such as hail, severe thunderstorms, and tornadoes, as distinct from primary perils like major hurricanes. They now account for the majority of modeled insured property losses globally, which means the operational challenge is maintaining throughput across hundreds of smaller events rather than preparing for one annual peak.