Publication Date: 29 October 2026 Category: Research Region: Global Focus: Climate Risk · Infrastructure · Insurance · Financial Resilience
Abstract
Infrastructure resilience is usually assessed through physical performance.
Can a building withstand flooding? Can an electricity network continue operating during extreme weather? How quickly can transport infrastructure recover after a disaster?
These questions remain essential. However, infrastructure also operates within financial systems that influence whether assets can be maintained, financed, repaired, and replaced.
Insurance is one part of that relationship.
An asset may remain physically operational while becoming more expensive to insure. Its policy may carry higher deductibles, narrower coverage, or stricter conditions. In some circumstances, insurers may reduce their willingness to provide protection.
These changes can affect investment decisions before physical infrastructure fails.
In October 2026, a Reuters commentary highlighted the growing importance of climate risk to insurance markets, property finance, and economic stability.
Swiss Re Institute also estimated that the global natural-catastrophe insurance protection gap reached approximately US$424 billion in 2025, measured in premium-equivalent terms.
That figure does not represent actual uninsured disaster losses during 2025 or the value of risks rejected by insurers.
Nevertheless, the research points to an important question.
Can changing insurance conditions help identify emerging weaknesses in infrastructure resilience?
This article examines how physical hazards, insurance markets, financing conditions, and public responsibilities interact, and why insurability may provide a useful but imperfect indication of financial resilience.
1. Physical Resilience and Financial Resilience Are Different
Infrastructure can remain physically functional while its economic conditions deteriorate.
A warehouse may continue operating even as flood-insurance costs rise.
A residential building may remain habitable while insurers introduce higher deductibles or exclude particular hazards.
A power facility may remain operational while the cost of protecting it against catastrophic losses increases.
These developments do not necessarily indicate immediate physical failure.
They indicate changes in how financial markets assess and distribute potential future losses.
Infrastructure owners must consider more than engineering performance.
They also need sufficient financial resources to maintain assets, meet contractual obligations, and recover after damage.
Insurance can help protect those resources by transferring specified risks to an insurer.
When coverage becomes more expensive or restrictive, asset owners may need to retain more financial exposure.
The distinction is therefore important.
Physical resilience concerns the ability to withstand and recover from disruption.
Financial resilience concerns the ability to absorb costs and continue operating economically.
An asset can perform well in one respect while becoming weaker in the other.
2. Insurance Terms Can Reveal Changing Risk Expectations
Insurers evaluate the probability and potential severity of losses when determining whether to provide coverage.
Their decisions reflect several factors, including physical hazards, the value of exposed assets, building characteristics, past claims, and uncertainty about future losses.
Those assessments influence insurance premiums and policy conditions.
An insurer may increase a deductible, reduce a coverage limit, introduce an exclusion, or require additional protective measures.
Such changes can provide information about perceived risk.
For example, repeated flood losses may influence the availability or pricing of property insurance.
Increasing wildfire exposure may affect underwriting requirements.
However, insurance terms are not a direct or perfect measurement of physical danger.
Premiums also reflect construction costs, reinsurance prices, investment conditions, regulation, competition, and insurers’ financial capacity.
An increase in insurance costs therefore cannot automatically be attributed to climate change alone.
Likewise, one insurer’s decision to withdraw from a market does not necessarily establish that every insurer considers the underlying assets uninsurable.
Insurance conditions are best understood as financial signals that require interpretation alongside physical-risk evidence.
3. Availability, Affordability, and Protection Gaps Must Be Distinguished
Insurance availability and affordability are related but different.
Coverage may remain available even when its price becomes difficult for a household, business, or infrastructure operator to afford.
A policy may also remain affordable while excluding a hazard that represents a significant source of potential loss.
These differences matter when evaluating financial protection.
A further distinction concerns the insurance protection gap.
Swiss Re Institute estimated the global natural-catastrophe protection gap at US$424 billion in 2025, compared with US$395 billion in 2024.
Its estimate is based on modelled expected losses and is expressed in premium-equivalent terms.
It measures the difference between existing insurance premiums and the estimated premium volume required to cover expected catastrophe losses.
It is not a measurement of actual uninsured disaster damage during 2025.
It also does not establish that insurers refused to cover US$424 billion of assets or losses.
Swiss Re found that insurance protection was broadly keeping pace with rising catastrophe exposure, even as the absolute protection gap expanded.
This illustrates why a larger protection gap does not necessarily mean that insurance availability is deteriorating everywhere.
The value of exposed assets can increase faster than the amount of protection required can be reduced.
Economic growth, construction in hazard-prone locations, and rising asset values can all contribute to the scale of potential losses.
A protection-gap statistic therefore needs to be interpreted within its specific methodology.
4. Insurance Conditions Can Affect Infrastructure Finance
Insurance plays an important role in many lending and investment arrangements.
Mortgage lenders often require property insurance.
Infrastructure financiers may require coverage for physical damage, business interruption, or other specified risks.
These arrangements help protect lenders and investors against financial losses that could threaten repayment or project operations.
If adequate insurance becomes difficult to obtain, financing conditions may change.
A lender may require additional security, greater financial reserves, or other forms of risk protection.
An infrastructure developer may face higher operating costs or reduced investment returns.
These changes can affect decisions about whether to build, expand, purchase, or maintain an asset.
Property markets can experience similar effects.
Potential buyers may consider expected insurance costs when assessing a property’s affordability.
However, insurance is only one influence on asset values.
Interest rates, employment conditions, housing supply, taxes, and local economic prospects also matter.
It would therefore be inappropriate to attribute a decline in property value to insurance conditions without supporting evidence.
The broader implication is that insurance can connect physical risk with financing decisions.
An asset does not have to experience immediate damage for changing risk expectations to influence its economic prospects.
5. Private Insurance Limits Can Increase Public Financial Exposure
When private insurance becomes expensive or difficult to obtain, the underlying physical risk remains.
It does not disappear because fewer insurers are willing to cover it.
Instead, more of the potential loss may remain with households, businesses, lenders, or governments.
Public authorities may respond through insurance programmes, guarantees, subsidies, disaster funds, or reconstruction assistance.
Such measures can serve important social and economic purposes.
They may help households maintain essential protection or support communities facing abrupt changes in private insurance availability.
However, public support does not automatically reduce the physical hazard.
A government-backed insurance arrangement may preserve access to coverage while the insured buildings remain exposed to the same flood or wildfire risk.
This creates a distinction between transferring risk and reducing it.
Risk transfer changes who bears the financial consequences of a loss.
Risk reduction changes the expected likelihood or severity of the loss itself.
Both can contribute to resilience, but they serve different functions.
Public programmes may be necessary where private markets cannot provide sufficient protection at workable prices.
Their long-term sustainability depends partly on whether physical risks can also be managed.
6. Physical Adaptation Can Help Preserve Insurability
Infrastructure adaptation aims to reduce vulnerability to damaging events.
Examples include improved drainage, stronger building materials, flood protection, wildfire-risk management, and reinforcement against severe storms.
When these measures work as intended, they can reduce expected damage.
Lower expected losses may improve the economic conditions under which insurance can be provided.
However, the relationship is not automatic.
An insurer must be able to assess whether an adaptation measure meaningfully reduces risk.
That may require engineering evidence, inspections, updated hazard information, or credible performance data.
The benefits of adaptation may also take time to appear in insurance pricing.
A newly completed flood-protection project, for example, may reduce physical exposure before insurers update their models or underwriting decisions.
Other market conditions may continue to influence premiums.
Consequently, an effective adaptation project does not guarantee an immediate reduction in insurance costs.
Nevertheless, Swiss Re Institute’s 2026 research emphasizes the importance of adaptation in reducing expected catastrophe losses and supporting the continued availability of insurance protection.
This suggests that physical resilience investment can generate benefits beyond avoided damage.
It may also help preserve access to risk transfer and support longer-term financial confidence.
7. Insurance Signals Have Important Limitations
Insurance markets can respond to changing risk expectations before infrastructure suffers visible damage.
This makes underwriting conditions potentially useful for monitoring emerging financial pressures.
However, market signals can be incomplete or distorted.
Insurance prices reflect the cost and availability of reinsurance, the financial position of insurers, regulatory requirements, and competitive conditions.
Insurers may also use different catastrophe models or assumptions.
Changes in coverage can therefore arise from factors unrelated to a specific improvement or deterioration in physical infrastructure.
The interpretation of insurance data becomes more reliable when supported by other information.
Engineering assessments can identify structural vulnerabilities.
Hazard models can estimate exposure to flooding, storms, or wildfire.
Claims experience can reveal the financial consequences of previous events.
Maintenance records can help determine whether protective infrastructure remains effective.
Insurance information adds another perspective, but it should not replace these sources.
There is also an important difference between households and large infrastructure operators.
Some institutions use self-insurance, captive insurance, financial reserves, or alternative risk-transfer arrangements.
A lack of conventional insurance does not necessarily mean such an institution is financially incapable of managing its risks.
The wider question is whether potential losses remain financially manageable.
8. Infrastructure Planning Must Consider Both Physical and Financial Continuity
Climate-related infrastructure planning increasingly requires coordination between engineering, finance, insurance, and public policy.
Engineering can identify ways to reduce physical vulnerability.
Insurers can provide information about the cost and availability of risk transfer.
Lenders can assess whether assets remain financeable.
Governments must consider essential services, affordability, land use, and potential public liabilities.
These perspectives are connected, but their objectives are not identical.
An insurer may decide that a particular risk no longer meets its commercial requirements.
A government may still need to maintain a hospital, water network, or road serving the affected community.
Some essential infrastructure cannot simply relocate to a lower-risk location.
Public authorities may therefore need to consider additional physical protection, alternative financing, or other risk-sharing arrangements.
Insurance signals can inform these decisions without determining them alone.
A further challenge concerns development in hazard-prone areas.
When more buildings and infrastructure are constructed in exposed locations, the potential financial consequences of disasters can increase even if individual assets become stronger.
Land-use decisions therefore influence long-term insurability.
Infrastructure resilience must consider both the protection of existing assets and the exposure created by future development.
The objective is not necessarily to minimize insurance premiums.
It is to maintain infrastructure that can withstand disruption, recover economically, and continue delivering essential services.
Research Conclusion
Infrastructure resilience is often evaluated through visible physical outcomes.
Buildings remain standing.
Roads reopen.
Electricity systems recover.
Water networks continue serving communities.
These measures are essential, but they do not capture every consequence of increasing physical risk.
Infrastructure also depends on financing, insurance, maintenance, and the ability to recover from financial losses.
Insurance conditions can provide useful information about this wider economic environment.
Higher premiums, larger deductibles, narrower coverage, and declining insurer participation may indicate that the cost or availability of risk transfer is changing.
These developments can influence lending, investment, and public financial responsibilities.
However, insurance markets are not perfect measures of physical resilience.
Their decisions reflect commercial and financial factors as well as expected damage.
A higher premium does not necessarily mean an asset is uninsurable.
Available insurance may still be unaffordable.
A widening protection gap does not automatically establish that insurers are withdrawing.
Government support can preserve coverage without reducing underlying hazards.
These distinctions are essential to interpreting insurance information responsibly.
Physical adaptation remains an important part of the response.
Reducing expected losses through better construction, drainage, flood protection, and other measures can improve resilience and potentially support insurance availability.
Yet the financial recognition of these improvements may not be immediate.
Insurability can serve as one indicator of infrastructure resilience because insurance markets translate expected physical losses and uncertainty into financial conditions.
It should not be treated as a substitute for engineering assessments, hazard information, or public-policy judgment.
The broader question is whether infrastructure can remain physically functional and economically sustainable as risks change.
A resilient asset must do more than survive a damaging event.
It must also retain the capacity to operate, maintain itself, obtain necessary financing, and recover from future losses.
Insurance can help reveal when that capacity is coming under pressure.
Its greatest value for resilience planning lies in being interpreted alongside credible physical evidence and long-term financial requirements.
Evidence and Limitations
This research draws on Reuters commentary published on 28 October 2026 and Swiss Re Institute research on natural-catastrophe losses, insurance resilience, adaptation, and protection gaps.
The US$424 billion estimate for 2025 is Swiss Re Institute’s modelled natural-catastrophe protection gap expressed in premium-equivalent terms. It is not the value of actual uninsured catastrophe losses in 2025.
The research does not establish that all insurance markets are withdrawing from climate-exposed regions or that climate change is the sole driver of increasing premiums.
It does not independently measure the effect of insurance costs on specific property values, lending decisions, or municipal finances.
Potential relationships between insurance conditions, infrastructure investment, and public financial exposure are discussed as economic mechanisms rather than universally demonstrated outcomes.
The article also does not assume that adaptation investments always produce immediate premium reductions or that conventional insurance is necessary for every type of infrastructure operator.
The use of insurability as a resilience indicator is an analytical interpretation that requires supporting physical and financial evidence.
References
- Reuters. (28 October 2026). Insurers Are Raising the Alarm on Growing Climate Risk. We Need to Listen.
- Swiss Re Institute. (2026). Growing Exposure: Closing the Protection Gap.
- Swiss Re Institute. (2026). Natural Catastrophes: Protection Gap and Resilience.
- Swiss Re Institute. (2026). Natural Catastrophes in 2025: The Persistent Rise of Wildfire and Storm Risk.
- Swiss Re Institute. (2026). Adaptation and Insurance: Strategies to Narrow the Protection Gap.