Hurricane Milton: Can Climate Tech Help Insurers Cope?

Category 5 storm Hurricane Milton has devastated Florida's Gulf Coast, with early estimates suggesting insurance losses could reach US$60bn, making it one of the most expensive natural disasters in history behind Hurricane Ian and Hurricane Katrina.

As insurers brace for this financial blow, the storm's impact is reigniting debates on how climate technology can help insurers and governments manage the growing risks associated with extreme weather.

Milton's destructive path has displaced more than a million people, causing widespread damage across the region. This catastrophe is further evidence of the rising frequency and intensity of storms, a trend scientists link to climate change.

Insurers, already struggling to cover mounting losses, are now looking to climate technologies to predict, prepare for, and mitigate the damage caused by extreme weather.

The rising costs of climate change for insurers

With climate change driving increasingly severe natural disasters, the financial strain on the insurance industry is becoming evident.

Hurricane Milton’s anticipated US$60bn in insured losses is just the latest in a string of escalating disasters.

Swiss Re Institute’s research highlights a troubling pattern: extreme weather events like hurricanes, floods and wildfires are becoming more frequent and costly, with many exacerbated by global warming.In response, insurers and reinsurers are beginning to adopt climate technologies to help manage these risks.

From advanced predictive models that forecast storm patterns more accurately to satellite data that assesses damage in real-time, technology is becoming a crucial tool in the industry’s fight to keep pace with climate change.

Insurers are also using artificial intelligence (AI) to analyse historical data, which helps refine premium calculations based on evolving climate risks. This enables insurers to offer more tailored and resilient coverage, particularly in high-risk areas.

In addition to pricing adjustments, climate tech is driving the development of new insurance products designed to address climate-specific risks, such as flood insurance for previously uninsurable areas.

While these innovations offer hope, they come at a cost. Higher premiums for climate-risk policies are already becoming a burden for homeowners in vulnerable areas — and this trend is likely to continue as climate-related disasters increase.

The role of reinsurance and climate resilience

Despite the heavy losses caused by Hurricane Milton, analysts believe the insurance industry has made strides in building financial resilience.

After Hurricane Ian, insurers invested heavily in reinsurance and bolstered reserves to better absorb the impact of future storms. However, climate technology is playing an increasingly important role in shaping reinsurance strategies and improving the industry’s preparedness for catastrophic events.

Reinsurers, such as Swiss Re and Munich Re, are incorporating climate tech into their operations to model disaster risks more accurately.

These models use data on ocean temperatures, wind patterns and historical storm activity to simulate the potential damage of future hurricanes. This approach allows insurers to better understand the magnitude of risks and price reinsurance contracts accordingly.

Additionally, technology is helping to improve the physical resilience of buildings and infrastructure in hurricane-prone regions.

Innovations such as climate-resistant materials and smart sensors that monitor structural integrity in real-time are being adopted to minimise damage during storms.

As insurers begin to incentivise the use of such technologies, homeowners and businesses are encouraged to invest in climate-proofing their properties, ultimately reducing the burden on insurers when disaster strikes.

Climate technology: the future of insurance?

As climate change continues to fuel extreme weather events, the insurance industry is being forced to rethink its approach to risk management.

Many industry leaders believe that climate technology will be key to ensuring the sector’s survival in an increasingly volatile world.

Andrew Robinson, Chief Executive Officer and Chairperson of the Board at Skyward Specialty Insurance Group, says the Florida insurance market "has been living on borrowed time for 20 years," adding that the hurricane could change the outlook of the market "forever".

One promising area of innovation is the use of blockchain technology to streamline claims processing in the wake of natural disasters.

Blockchain enables insurers to process claims more efficiently by creating a secure, transparent and tamper-proof ledger of transactions.

This could significantly reduce the time it takes for policyholders to receive pay-outs after events like hurricanes, alleviating some of the financial strain on affected communities.

Another exciting development is the rise of parametric insurance, which uses predefined triggers — such as wind speed or rainfall levels — to automatically pay out claims when certain thresholds are met.

Parametric policies are highly reliant on climate data and predictive analytics, making them a prime example of how technology can enhance the industry’s ability to manage climate-related risks.

However, while climate technologies offer new ways for insurers to manage risk, they also raise concerns about affordability and accessibility.

As premiums rise to cover the cost of climate-related damage, many homeowners in high-risk areas may find it increasingly difficult to obtain insurance.

This has led some experts to question whether the industry can continue to provide coverage in a world where extreme weather events are becoming more frequent and severe.

Former AXA CEO Henri de Castries once warned: “A world warmed by two degrees Celsius might be insurable, but a world warmed by four degrees certainly would not be.”

As climate change pushes the limits of insurability, the role of climate technology will become even more critical in helping insurers adapt to the challenges ahead.

Can climate tech offer a sustainable solution?

While insurers have made progress in adopting climate technologies to mitigate risk, there is still much work to be done.

For example, in California, some insurers have already withdrawn coverage from wildfire-prone areas, leaving residents without protection.

A similar scenario could unfold in hurricane-prone regions, where insurers may refuse to cover properties unless significant climate-proofing measures are implemented.

Looking ahead, the insurance industry will need to continue investing in climate technologies to stay ahead of the growing risks.

Predictive models, AI and blockchain can help insurers better prepare for and respond to disasters, but these tools must be part of a broader strategy that includes climate-resilient infrastructure and more accessible coverage options.

Ultimately, the question remains: Can climate technology help insurers adapt fast enough to keep up with the escalating risks posed by climate change?

As Hurricane Milton has shown, the costs of inaction are only growing.

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