Most businesses buy insurance one renewal at a time. The broker sends a proposal, the premium is compared with last year’s, and the decision comes down to price and whatever changed on the application. That approach works reasonably well when losses are small and predictable. It works far less well when a single weather event can interrupt operations for months, damage multiple locations at once, or push a supplier out of business.

For that reason, climate risk deserves a place in long-term insurance and risk planning, not as an environmental talking point but as a financial and continuity question. Wildfire, hail, flash flooding, severe wind, and extreme heat each touch different parts of the balance sheet: property values, business income, workers’ compensation, contracts, staffing, and the ability to serve customers.

This article takes a strategic view. It looks at what recent loss data shows, where standard coverage tends to fall short, and how business leaders can build weather exposure into the way they buy, structure, and manage insurance.

Why Weather Exposure Is a Strategy Question, Not Just a Coverage Question

A coverage question asks, “Is this loss covered?” A strategy question asks, “How much of this loss can we absorb, how much should we transfer, and what can we do to make it smaller?” Weather exposure belongs in the second category because the answers affect capital, contracts, staffing, and growth plans, not only the policy.

The long-term data supports that view. Swiss Re Institute reports that global insured losses from natural catastrophes have been growing at roughly 5% to 7% a year in real terms. Its latest sigma study says the long-term growth trend remains intact, with exposure continuing to concentrate in hazard-prone areas and secondary perils contributing an increasing share of insured losses.

That matters to any business that has added buildings, equipment, inventory, vehicles, or locations over the past several years. Even if the hazard itself does not change, the amount of value exposed to that hazard can increase. A larger facility, more expensive equipment, higher inventory levels, or a second location can all increase the financial impact of the same type of event.

Swiss Re’s latest study also offers a caution against reading a quiet year as good news. Insured natural catastrophe losses in 2025 totaled USD 107 billion, below the roughly USD 140 billion implied by the long-term trend. Swiss Re described 2025 as a relatively favorable catastrophe year rather than a change in the underlying risk trajectory. If the long-term growth trend continues, insured losses in 2026 would trend toward approximately USD 148 billion.

For a business owner, the practical lesson is simple. A year without a major weather loss tells you about the past, not necessarily about the structure of your insurance program.

What the 2025 Loss Picture Tells Business Leaders

The 2025 figures from Swiss Re Institute’s sigma 1/2026 study show where losses are coming from, and the answer is not always the headline-making hurricane. Swiss Re reported USD 107 billion in insured natural catastrophe losses across 190 events, with economic losses totaling USD 220 billion. Insurance covered 49% of those economic losses, leaving more than half uninsured.

Chart: Global Natural Catastrophe Losses in 2025

Measure	2025 Figure	Source
Insured natural catastrophe losses	USD 107 billion	Swiss Re Institute
Number of loss events	190	Swiss Re Institute
Economic losses	USD 220 billion	Swiss Re Institute
Share of economic losses insured	49%	Swiss Re Institute
Insured losses from the Los Angeles wildfires	USD 40 billion (costliest wildfire event on record)	Swiss Re Institute
Insured losses from severe convective storms	More than USD 50 billion (third straight year)	Swiss Re Institute
Loss level implied by long-term trend	About USD 140 billion	Swiss Re Institute

Three points stand out.

Secondary perils are driving claims. Severe convective storms, which include hail, straight-line wind, and tornadoes, exceeded USD 50 billion in insured losses for the third consecutive year, even without a U.S. hurricane landfall. Swiss Re reported that secondary perils accounted for 92% of insured natural catastrophe losses in 2025. These events are frequent, regional, and often small enough to escape national headlines, yet they can produce large aggregate claim volumes.

Wildfire has changed category. The January 2025 Los Angeles wildfires produced an estimated USD 40 billion in insured losses, making them the costliest insured wildfire event on record. Swiss Re noted that the fires demonstrated how concentrated property values, development near wildland areas, weather conditions, and other factors can combine to create very large losses from a regional event.

A protection gap remains. Even at a record 49% insured share, more than half of economic losses were uninsured. For a business, that gap represents the portion of a loss that must ultimately be absorbed through retained capital, financing, business resources, or other sources.

The numbers also show why businesses should avoid focusing only on major hurricanes. A company may never experience a catastrophic storm directly and still face repeated losses from hail, wind, wildfire smoke, flooding, utility interruption, or supply-chain disruption.

A Softer Property Market Is an Opportunity, Not a Reason to Relax

Pricing conditions are favorable at the moment. Marsh’s Global Insurance Market Index for the second quarter of 2026 showed U.S. property rates declining 13%, the eighth consecutive quarter of decreases. Marsh attributed the broader rate reductions to abundant capacity and strong insurer competition, with other factors including lower reinsurance costs and strong insurer profitability contributing to the market environment.

That matters because a softer market can create room to revisit more than premium. John Donnelly, President of Global Placement at Marsh Risk, said insurers in many markets were competing through “broader coverage, expanded policy terms, and lower deductibles,” rather than relying only on price.

A better use of this window is to ask what the business could not afford to lose and then price solutions for that exposure.

That could mean reviewing weather-related deductibles, increasing business income or extra expense limits, reconsidering utility service interruption coverage, or evaluating flood protection that may previously have been viewed as too expensive. It can also mean reviewing valuation methods and sublimits that have remained unchanged for several renewal cycles.

A lower premium is useful. But if a lower premium comes from accepting a larger deductible, reducing limits, or leaving a known exposure uninsured, the business may simply be moving the cost from the insurance budget to the balance sheet.

The current market provides an opportunity to examine that tradeoff carefully.

Five Weather-Driven Exposures and How They Reach the Balance Sheet

1. Wildfire and smoke. Direct fire damage is typically a covered peril under commercial property forms, so the strategic questions are about adequacy. Are building and contents values current? Is the business income limit sized for a realistic rebuild period? Does the policy address increased costs from building code enforcement, often called ordinance or law coverage, which is frequently limited unless endorsed?

Businesses in or near wildfire-prone areas should also expect underwriters to ask about defensible space, construction type, access for emergency responders, fire protection, and the surrounding location. Smoke can create additional cleanup, equipment, inventory, and business interruption issues even when a building does not experience a total fire loss.

2. Hail, wind, and severe convective storms. These events drive frequent claims involving roofs, HVAC equipment, vehicles, exterior systems, and other property. Policies in some regions carry separate or percentage-based deductibles for wind and hail, and some carriers apply roof-surface limitations that may settle certain losses on an actual cash value basis.

Understanding those terms in advance prevents a surprise gap between expected and actual recovery. A building owner may know the total property limit but not realize that a percentage deductible or roof valuation provision could substantially change the amount recovered after a loss.

3. Flood and flash flooding. Standard commercial property forms generally exclude flood and surface water, so protection typically requires separate flood coverage through the National Flood Insurance Program or the private market.

NFIP flood coverage normally has a 30-day waiting period, although specific exceptions apply. One important exception involves certain post-wildfire flooding situations where federal land is affected and the policy is purchased within the applicable timeframe.

The fire-then-flood sequence near Ruidoso, New Mexico is a regional example. After the South Fork and Salt fires in June 2024, heavy rain in the area contributed to severe flooding in July 2025. Burn scars can remain vulnerable to flash flooding and debris flows well after the fire itself is over. The National Weather Service says susceptibility is generally greatest during the first two years, although the elevated risk can last longer depending on burn severity, erosion, terrain, and vegetation recovery.

One peril can set up another, which is why reviewing hazards individually may not be enough.

4. Extreme heat. Heat is primarily a people exposure, covered in the next section.
5. Interruption beyond your own walls. Weather does not need to touch your building to stop your operation. A damaged supplier, a power outage, a closed road, or damage to another critical facility can interrupt revenue.

Time-element coverages such as dependent property, utility service interruption, civil authority, and extra expense respond to some of these situations, but each carries conditions, waiting periods, limits, and time restrictions. Many businesses discover these terms only after a loss.

The key question is not simply whether the business owns a damaged building. It is whether the business can continue operating when a weather event affects the systems it depends on.

Heat, Workers’ Compensation, and Changing Expectations in Arizona

Heat is a measurable workplace hazard. The latest Bureau of Labor Statistics data, as reported by the National Safety Council’s Injury Facts, recorded 48 work-related deaths from exposure to environmental heat in 2024, along with approximately 7,100 days-away, restricted, or transferred cases across 2023 and 2024.

Arizona employers are operating in an evolving environment. In April 2026, the Industrial Commission of Arizona approved workplace heat safety recommendations that call for written heat illness prevention plans, access to cool water and shade, rest, training, and gradual acclimatization.

Arizona has not adopted a separate enforceable heat standard with fixed temperature triggers. Instead, ADOSH operates a Heat State Emphasis Program, and heat hazards can also be addressed under the General Duty Clause. OSHA’s proposed federal heat rule has not been finalized.

For insurance strategy, this has several implications.

First, workers’ compensation claims from heat illness are a loss-control issue as much as a coverage issue, so documented procedures matter.

Second, written plans, training records, and incident logs give underwriters evidence of how seriously the business takes the exposure. Good documentation can also help management identify patterns before they become repeated claims.

Third, contractors, landscapers, agricultural operators, construction businesses, and warehouse operations should check that new-hire acclimatization and supervisor training are part of onboarding, not simply a summer memo.

For businesses looking to strengthen workplace procedures, Infinity Insurance Partners also offers Loss Control Solutions that include safety resources, OSHA injury and illness tracking, training support, and risk-management tools.

Heat also illustrates why weather exposure cannot be treated as a property-only issue. A business can protect its buildings and still experience significant financial consequences if employees cannot safely perform their jobs.

Where Standard Coverage Often Falls Short

When weather losses are reviewed after the fact, the same gaps tend to appear.

• Flood exclusion. Some owners assume “water damage” includes flood. It usually does not.
• Weather-specific deductibles. A percentage deductible on a high-value building can be far larger than the flat deductible on the rest of the policy.
• Roof valuation. Actual cash value settlement on aging roofs can leave a significant out-of-pocket cost after hail.
• Business income waiting periods. Under common standard forms, business income coverage can be subject to a waiting period, often 72 hours, although policy terms and endorsements can modify the waiting period. The period of restoration may also be shorter than a realistic rebuild.
• Ordinance or law. Rebuilding to current code can cost more than rebuilding to the original standard, and the coverage for that difference is often limited.
• Dependent property. Contingent business income coverage generally depends on covered damage to qualifying property of a supplier, customer, or other dependent business, subject to the policy’s specific terms and conditions.
• Utility service interruption. Off-premises power or water failure is often excluded unless added by endorsement.
• Coinsurance penalties. Underinsured buildings can trigger a reduced payment even on a partial loss.

Some businesses also explore parametric insurance, which pays a pre-agreed amount when an index, such as wind speed or rainfall at a defined location, reaches a specified trigger.

Parametric coverage is not a replacement for traditional property insurance because the payment depends on the defined trigger rather than the exact amount of physical damage. But it can complement traditional coverage by providing a predetermined source of funds for immediate costs when a qualifying event occurs.

Where the exposure is concentrated, it may be worth including parametric solutions in the broader risk-financing conversation.

A Practical Framework: Identify, Quantify, Finance, Mitigate

Climate risk becomes more manageable when it is broken into four decisions. This is a working framework for organizing the conversation, not an industry standard.

Identify. Map the locations, supply chain dependencies, vehicles, and workforce activities that are exposed to wildfire, hail, flood, wind, or heat. Include single points of failure, such as the one facility that produces most of your revenue or the one supplier with no backup.

Quantify. Estimate what a realistic bad event would cost. Consider repair or rebuild time, lost revenue, extra expense, contractual penalties, temporary operations, employee disruption, and the cost of relocating or outsourcing work.

These estimates should drive limits and sublimits, not simply the previous year’s numbers.

This is where a formal Property & Casualty Services review can be useful. Infinity Insurance Partners lists exposure analysis, retention analysis, claims analysis, loss control techniques, OSHA compliance and reporting, safety education, and safety programs among its property and casualty services.

Finance. Decide what to retain, what to insure, and what to transfer by contract. Match deductibles and retentions to cash flow. Confirm flood, business income, and time-element coverages respond to the scenarios identified above.

Consider whether a softer property market allows better terms rather than just a lower premium. The goal is not to insure every possible dollar of loss. It is to make deliberate decisions about which losses the business can absorb and which ones could materially threaten its operations.

Mitigate. Reduce the size of the loss before it happens. Examples include roof inspections and maintenance, defensible space, flood barriers or elevation of critical equipment, backup power, offsite data copies, supplier diversification, and written heat illness prevention procedures.

Mitigation also supports underwriting, since carriers can evaluate documented risk improvements rather than relying only on generalized descriptions of the account.

Revisit the framework annually and whenever the business adds a location, changes suppliers, signs a major contract, acquires equipment, or significantly changes its operations.

Each review should produce a short, written list of decisions, owners, and dates, so the work does not stall between renewals.

Telling Your Resilience Story to Underwriters

Carriers evaluate more than a loss run. For weather-exposed accounts, underwriters tend to look at location, construction, protective features, and what the business has done to reduce the size of a potential loss.

A submission that documents those details gives the underwriter something to evaluate besides the exposure itself.

Useful items to include are roof age and condition, recent inspections, fire protection and defensible space, flood mitigation steps, backup power arrangements, written continuity plans, supplier contingency plans, and records showing that employee training has been completed.

None of these guarantees a better insurance outcome, but they help demonstrate how the business is managing its exposure. They also give your broker concrete material to use when presenting the account and negotiating terms.

Documentation helps after a loss as well.

Photographs, valuation records, inventory lists, maintenance logs, inspection reports, and equipment records can help demonstrate the condition and value of property. Keep copies offsite or in cloud storage, since those records are only useful if they survive the event.

For businesses in areas with significant weather exposure, documentation should be treated as part of the risk-management program rather than something assembled only when the renewal application arrives.

Contracts, Lenders, and Weather Exposure

Insurance strategy does not stop at the policy. Leases, loan agreements, and customer contracts often set minimum insurance requirements, assign responsibility for damage, or require continued performance during disruptions.

A weather event can turn a routine contract clause into a financial obligation.

Review these documents with a few questions in mind. Does a lease require you to carry specific property limits or flood coverage? Does a loan agreement require lender notice or proof of coverage after a loss? Do customer contracts include penalties for delayed delivery, and does your business income coverage account for them? Do vendor agreements give you any recourse if a supplier cannot perform after a storm?

Certificates of insurance and additional insured endorsements should also be checked, since requirements may change when a business adds locations, enters new states, or changes its contractual relationships.

Where the contract creates exposure the policy does not address, you have three choices: negotiate the contract language, buy additional coverage, or accept the retained risk knowingly.

The worst outcome is discovering the gap during a claim.

Stress-Test Questions for Leadership

Before the next renewal, leadership teams can use a short set of scenario questions to test whether the program matches the business. These are prompts for discussion, not predictions.

• If our main facility were unusable for six months, how long could we operate, and what would we lose in the meantime?
• If our largest supplier could not deliver for 30 days, which customers would we disappoint first?
• If a flash flood reached our location, would we have coverage in force, and how long ago was it bound?
• If hail damaged every roof and rooftop unit at once, what would the deductible and valuation terms mean in dollars?
• If employees could not safely work outdoors for several days during extreme heat, how would that affect revenue and contractual commitments?
• If a loss exceeded our limits, who would absorb the difference?
• If a critical utility went down for several days, what would keep the business operating?
• If our primary supplier suffered a major loss, how quickly could we shift to an alternative?
• If our property values have increased substantially, are our limits still based on current replacement costs?

The answers rarely come from the policy alone. They come from comparing the policy with how the business actually runs.

That is why the first step in the framework above is mapping exposures rather than shopping for coverage.

Practical Checklist Before Your Next Renewal

• List every location and note exposure to wildfire, flood, hail, high wind, and extreme heat.
• Compare building and contents values with current replacement cost.
• Confirm whether flood coverage exists, and note the waiting period before new coverage takes effect.
• Review wind and hail deductibles and roof valuation terms.
• Check business income limits, waiting periods, and the period of restoration against a realistic recovery timeline.
• Ask about dependent property, utility service interruption, civil authority, and extra expense coverage.
• Review ordinance or law limits for older buildings.
• Identify critical suppliers and customers, and confirm contingency plans.
• Document mitigation steps, such as inspections, maintenance, backup power, and training.
• Confirm that written heat illness prevention plans and acclimatization procedures are in place.
• Review contracts for insurance requirements that weather events could affect.
• Review lender and lease requirements for insurance and loss reporting.
• Keep property valuations, photographs, inspection records, and inventory information in a secure offsite location.
• Decide in advance how much uninsured loss the business can absorb.

Putting Weather Exposure Into Practice With a Local Partner

A strategy is only useful if someone does the analysis. Infinity Insurance Partners is a commercial insurance brokerage with offices in Arizona and New Mexico, and its Property & Casualty Services include exposure analysis, retention analysis, claims analysis, loss control techniques, OSHA compliance and reporting, safety education and training, and safety programs.

The firm’s exposure analysis starts with learning about a client’s business and identifying ways to minimize exposures. That makes exposure analysis a practical starting point for a weather-focused insurance review.

Infinity Insurance Partners also provides Loss Control Solutions that include safety resources, OSHA injury and illness tracking, and risk-management support.

Its Risk Management Services include incident management, job-site inspections, process management, and training and certification resources. For businesses with significant workforce or operational exposures, these services can complement the insurance program by addressing the conditions that contribute to losses.

For a business owner, the goal is not simply to buy more insurance. It is to understand where the business is exposed, decide what should be transferred or retained, and make sure the insurance program reflects how the business actually operates.

If you want to test your current program against the exposures described here before the next renewal, contact Infinity Insurance Partners to start the conversation.

Q&A

Question: Does standard commercial property insurance cover flood damage?

Short answer: Generally no. Standard commercial property forms typically exclude flood and surface water, so protection usually requires separate flood coverage. NFIP coverage normally has a 30-day waiting period, subject to specific exceptions, so businesses should arrange coverage well before a known threat.

Question: Why does weather exposure matter if my area has not had a major loss?

Short answer: Swiss Re Institute’s data shows that a relatively quiet year can reflect favorable catastrophe variability rather than lower underlying risk. The long-term trend in insured catastrophe losses remains elevated as exposure grows and secondary perils continue to generate significant losses.

Question: Should I take advantage of falling property rates?

Short answer: Yes, but use the opportunity to improve structure as well as price. Marsh reported U.S. property rates down 13% in the second quarter of 2026. That creates an opportunity to revisit deductibles, business income limits, valuation, and time-element coverages rather than focusing only on premium.

Question: How does extreme heat affect my insurance program?

Short answer: Mainly through workers’ compensation and safety management. Documented prevention plans, training, acclimatization procedures, and incident records can help reduce injury potential and demonstrate that the exposure is being actively managed.

Question: How often should weather exposure be reviewed?

Short answer: At least once a year ahead of renewal, and whenever the business adds a location, changes a key supplier, signs a major contract, acquires significant property, or significantly changes its operations.

Question: What is the first step in reviewing weather exposure?

Short answer: Map your locations, critical suppliers, workforce activities, and key dependencies against the hazards that affect them. Then compare that map with your current limits, deductibles, exclusions, waiting periods, and time-element coverages.