Businesses face increasing financial risks due to climate change. However, a recent report by specialty insurer Beazley reveals a significant disconnect: many companies are focusing on short-term economic challenges rather than long-term resilience. The report, titled “Risk & Resilience: Spotlight on Environmental & Climate Risk 2025,” underscores potential implications for insurance coverage and overall financial stability.
Despite the escalating frequency of extreme weather events, the report found that only 20% of executives rank climate-related catastrophic risk as a top concern. This is in contrast to the 72% who have adopted new risk management procedures in response to severe weather, suggesting a reactive, rather than proactive, approach to climate adaptation.
Insurers are cautioning that without stronger risk mitigation strategies, businesses could face several consequences, including rising premiums, coverage limitations, or even difficulty securing insurance in high-risk areas. The findings also shed light on the challenges associated with transitioning to non-carbon energy sources: 67% of executives reported difficulties navigating this shift. However, concern over energy transition risk is waning, with only 21% identifying it as their greatest environmental risk, a decrease from 23% in 2024.
Regulatory uncertainty is another factor influencing corporate risk assessments. The report indicates that 19% of executives cited non-compliance with environmental, social, and governance (ESG) regulations as a key risk, down from 22% the previous year.
Paul Bantick, Beazley’s Chief Underwriting Officer, emphasized the potential for businesses to underestimate the long-term financial impacts of environmental and climate risks. “2024 was marked by numerous Black Swan weather events—once considered rare, they are now becoming the norm,” Bantick stated. “Yet, our research shows that executives remain focused on immediate uncertainties, potentially overlooking the larger threat of climate and environmental risks.”
As the insurance industry adapts to rising claims costs, the industry is using climate risk data and developing insurance solutions to aid businesses in managing financial exposure. However, the report revealed that sustainability investments have been deprioritized by 73% of executives due to economic uncertainty. Consequently, insurers are warning that businesses failing to act now could face higher costs and increased risks in the coming years.
