Actuaries Are Canaries in the Coal Mine

What Insurance is Telling Us About Climate Risk Before the Rest of the Market Notices

The Disappearing Safety Net

In boardrooms across America, a new kind of employee is quietly clocking in. They don’t take lunch In the summer of 2024, a mid-sized town in Northern California found itself at a crossroads. After enduring a series of wildfires over three consecutive seasons, several of its largest insurers quietly stopped renewing homeowners’ policies. Residents who had dutifully paid premiums for decades were left scrambling to find coverage, with many forced into the bare-bones FAIR Plan, the state’s insurer of last resort.

The town’s story is far from unique. Across North America, insurers are sending clear signals: risk is rising faster than previously priced, and some geographies are becoming economically uninsurable. While headlines often focus on disaster relief or infrastructure damage, it is the insurance industry, and its actuaries, that often detects systemic risk long before the public, the media, or even regulators.

In the same way that canaries once signaled invisible danger in coal mines, actuaries are the sentinels of financial volatility. Their job is to quantify future risk. And increasingly, what they’re quantifying is a world of accelerating climate disruption. The cost of inaction isn’t just theoretical. It shows up in climbing premiums, shrinking coverage, and a quiet retreat from risk hotspots. This article explores how changes in insurance data, pricing, and underwriting offer some of the earliest and most actionable warning signs for business leaders navigating an unstable climate future.

Climate as a Financial Signal

Insurance is where physical climate impacts become financial. Floods, fires, and storms don’t just damage buildings, they trigger claims, deplete reserves, and rewrite underwriting models. In this way, insurance loss data is among the first economically measurable signals of environmental stress.

In 2024, the U.S. experienced 27 separate weather events causing at least $1 billion in damage, the second-highest annual count ever recorded. Globally, insured catastrophe losses exceeded $137 billion. While these numbers are staggering, what matters more is the trajectory. Over the past decade, the frequency and cost of so-called “secondary perils”, like hailstorms, flash floods, and wildfires, have grown dramatically.

Actuaries see this trend not as an anomaly, but as a shift in baseline risk. What was once considered a one-in-100-year event is now being modeled as a one-in-20 or even one-in-10. Climate volatility is distorting the actuarial tables, and the effects are spilling over into every sector of the economy.

Actuarial Red Flags

So how exactly do actuaries raise the alarm? One way is through pricing. When insurers file for double-digit rate increases year after year, especially in specific ZIP codes or lines of business, it’s often because their actuaries have re-run the models, and the math no longer works.

In California, for example, rate filings after the 2018 and 2020 wildfire seasons included justifications citing not only historical losses but climate-driven model updates projecting more frequent extreme events. Insurers are also bolstering reserves for catastrophic risk, even in the absence of recent losses. This behavior reflects forward-looking concerns about volatility, not just past experience.

Model updates are another red flag. After years of loss experience exceeding modeled expectations, particularly in wildfire zones, vendors like Verisk and RMS revised their catastrophe models, sharply increasing the projected losses for certain geographies. Actuaries, in turn, adjusted underwriting thresholds and recommended higher capital reserves. These behind-the-scenes recalibrations are among the clearest financial signals that climate risk is being repriced.

The Silent Retreat

Perhaps the most telling indicator of systemic risk is what insurers are no longer willing to do. In high-risk areas across North America, from Florida’s hurricane-exposed coastlines to wildfire-prone zones in Alberta and British Columbia, insurers are quietly pulling back.

This retreat rarely makes headlines. It shows up in thousands of individual non-renewal notices, in subtle coverage exclusions for wildfire or flood, and in the slow migration of policyholders into state-backed residual markets. California’s FAIR Plan, for instance, saw its policy count surge by over 40% between 2022 and 2024. Similarly, Florida’s Citizens Property Insurance Corporation became one of the state’s largest insurers by policy count, a role it was never meant to fill.

These developments are not just insurance stories. They signal that some risks are outpacing the capacity, or willingness, of the private market to absorb them. For businesses with physical assets, supply chains, or customers in these areas, the disappearance of affordable, comprehensive insurance is a flashing red light.

The Expanding Protection Gap

Another leading indicator is the widening protection gap, the difference between total economic losses from disasters and the portion covered by insurance. In 2024, only 43% of global catastrophe losses were insured, leaving $181 billion in uncovered damages.

This gap is particularly wide in the U.S. when it comes to flood. FEMA’s flood maps are outdated in many regions, and most homeowners’ policies exclude flood by default. Actuaries know this, and increasingly, so do property investors, lenders, and local governments. The result? Even a relatively small flood event can wipe out uninsured assets and create cascading financial instability.

As the frequency and severity of extreme weather increases, the protection gap becomes not just a humanitarian issue, but a strategic business risk. Companies with large asset bases, infrastructure exposure, or extended value chains need to understand how insurance market changes are redefining their financial resilience.

Regulatory Lag vs. Risk Reality

While actuaries adjust models and insurers reprice risk, regulators are often playing catch-up. Rate approvals, coverage mandates, and underwriting restrictions can slow an insurer’s ability to adapt to new realities.

California only recently permitted insurers to include reinsurance costs and forward-looking wildfire models in their pricing. Until that change, insurers had to base premiums on outdated historical averages, a mismatch that led many to simply stop offering new policies.

The lag between actuarial foresight and regulatory frameworks creates a tension. On one side, consumer protection demands stability and affordability. On the other, solvency and market viability require accurate risk pricing. When these forces diverge too far, the result is market dysfunction, as seen in states where private insurers have exited en masse.

Early Warnings, Broad Implications

When actuaries adjust models, when insurers pull back, when premiums climb sharply, these are not random events. They are signals. And while they may originate in the back offices of insurance firms, their implications are far-reaching.

The actuarial profession, by its very nature, looks forward. Actuaries quantify uncertainty. In doing so, they provide some of the clearest, data-driven early warnings about the financial impacts of climate change.

For business leaders and risk managers, the key is not just to observe these signals, but to interpret them as part of a broader strategy for resilience. Insurers are not infallible, but they are often first, first to model the risk, first to price it, and first to act when the numbers no longer add up.

In a world of accelerating climate volatility, ignoring those early warnings could be the most expensive decision of all.