Amidst increasing hazards and insurance costs, companies turn attention to severe weather risk

From 2020-2024, the U.S. experienced an average of 23 severe weather events per year with losses over $1 billion each, significantly exceeding longer-term historical averages.¹ Overall economic losses from natural disasters in the U.S. in 2024 reached $218 billion, twice the 2020-2024 average ($109 billion).² While we often think of severe weather as a coastal issue, events span the U.S., impacting diverse geographies and communities. Over the past year, from Texas to Los Angeles to North Carolina, communities have endured losses that transcend mere numbers. Rebuilding livelihoods rooted in places that have long been home will take years.

For corporate clients, the need to proactively understand and plan for severe weather risk is critical. In addition to business disruption, downtime and costs, severe weather events drive increased insured losses (i.e., the portion of economic losses that are covered by insurance). Total insured losses rose 36% in 2024 to $113 billion, exceeding the average ($58 billion) and median ($45 billion) figures from 2000-2024.³ This trend is leading insurers to adjust practices, transferring more risk and cost to policyholders. When it comes to securing adequate insurance coverage to safeguard against weather-related costs, companies may face:

• Coverage gaps and fewer options for insurers
• Higher rates and deductibles
• Tighter terms and narrower coverage (such as exclusions of secondary perils)
• Property value implications

Lack of investment in resilience and risk mitigation in the short term may impact future insurability, leaving companies with fewer options for managing costs.

Banks and lenders are paying attention to these shifts, including heightened monitoring and execution of scenario analysis to better understand potential impacts on borrowers and opportunities to support.

Key actions and best practices for businesses

The transfer of risk and cost to businesses raise questions about resilience and financial stability. Severe weather impacts can lead to increased operational, credit and reputation risk due to the location of properties and supply chain partners and the lack of mitigation plans. In a recent survey conducted by Chubb, companies that have experienced a natural disaster reported moderate or significant impacts to operations (59%), brand (55%) and finances (51%), underscoring the need to take action now to mitigate key impacts.⁴

Sixty-one percent of business leaders surveyed on behalf of Citizens reported that they are increasingly concerned about severe weather risk to their business in the next 1-3 years. In the New England and tri-state area, which have experienced recent hurricanes, winter storms and flooding, that number increases to 67% and 68%, respectively.⁵ These leaders reported planning to take the following actions in the next 1-3 years to mitigate impacts and better position themselves to navigate financial costs, downtime and business disruption.

Finally, businesses should look for opportunities. Severe weather creates emerging market needs that companies can fill with differentiated products and solutions, such as back-up power solutions or weather resistant building materials that may generate new revenue via expansion opportunities.

Preparing your organization for severe weather risks

At Citizens, our Sustainable Finance Advisory team and platform of experts can work with clients and prospects to provide flexible, tailored financing and credit solutions that meet client needs related to severe weather. As banks monitor and seek to better understand how severe weather presents risks to companies, they are also seeking feedback on how to support their clients so they can proactively invest in mitigation and continue to thrive.