What 2025 Taught Us: Three Insurance Lessons to Bring into 2026

1. Climate Risks Are Now Year-Round and Intensifying

In 2025, extreme weather disasters struck in all seasons, proving that climate risk is no longer limited to a “hurricane season” or region. For example, January’s Los Angeles wildfire became the costliest wildfire event on record (over $40 billion in insured losses) reuters.com, and historic floods in Southeast Asia caused another ~$25 billion in damage earth.org. Overall, the top 10 global climate disasters of 2025 – from wildfires to cyclones and floods – cost around $120 billion earth.orgearth.org. Insurers warn that such catastrophes are “no longer outliers but the new baseline,” urging greater resilience and adaptation efforts reuters.com.

Lesson for 2026: Climate risks will continue to intensify year-round. Business owners should regularly review their property and flood insurance coverage to ensure it’s up to date for today’s hazards. It’s wise to update disaster preparedness and business continuity plans annually, factoring in emerging threats like wildfires in traditionally “off” seasons. By proactively bolstering physical protections and insurance for climate events, organizations can better weather whatever 2026 brings.

2. Cyber Threats Are Escalating Across All Sizes

No organization was too small or mission-driven to escape cyber threats in 2025. Ransomware attacks and data breaches surged, hitting small businesses and nonprofits with alarming frequency. One analysis found that nearly 46% of small businesses experienced a cyberattack in 2025 – in fact, an incident occurred every 11 seconds on averagetotalassure.com. The financial fallout was severe: the typical breach cost ~$120,000, and 60% of hacked small companies had to close within six months totalassure.com. Nonprofits were equally at risk, with reports of a ~30% jump in cyberattacks on charities compared to the prior year bdo.com. Yet despite these dangers, many smaller organizations remain underprepared. Only about 17% of small businesses currently have cyber insurance coverage strongdm.com, and too few have strong security protocols in place.

Lesson for 2026: Cybersecurity must become a top priority in your insurance and risk strategy. Every business – big or small, for-profit or nonprofit – should strengthen its cyber defenses and consider transferring risk via cyber liability insurance. Practical steps include:

• Invest in Security Measures: Use firewalls, anti-malware tools, and enable multi-factor authentication on all accounts. Regularly back up critical data offline.
• Train Employees: Provide ongoing cybersecurity training (phishing awareness, safe browsing habits) since human error played a role in most breaches.
• Obtain Cyber Insurance: A cyber insurance policy can help cover response costs and losses if an attack occurs, providing a financial safety net. Review your coverage limits to ensure they match the current threat landscape.

By improving internal security and having proper cyber insurance, businesses can mitigate the escalating cyber risks of 2026.

3. Liability Is Costing More Than Ever

Liability exposures lurked as a silent but growing threat in 2025. The cost of lawsuits – from customer injury claims to employment disputes – has been driven higher by “social inflation,” a trend of larger jury awards and more litigation. In 2024, the U.S. saw a record number of “nuclear verdicts” (jury awards over $10 million), more than double the total from the year before global.lockton.com. This continued into 2025, putting upward pressure on liability insurance premiums. Even organizations with generally low-risk profiles, like nonprofits, felt the effects. Some insurers tightened coverage or raised rates, particularly for umbrella liability policies, in response to the surge in big lawsuits global.lockton.com. These trends have put all organizations on notice – in today’s legal climate, even a single incident can be financially devastating. In fact, experts note that some organizations “can be bankrupted by a single lawsuit,” which is why many are now carrying higher liability limits and umbrella policies for extra protection heffins.com.

Lesson for 2026: It’s critical to evaluate your liability coverage in light of rising legal risks. Ensure your general liability, directors & officers, and other liability policies have adequate limits to handle worst-case scenarios. Many businesses and nonprofits are opting to add an umbrella liability insurance policy – an extra layer of protection that kicks in when primary policy limits are exhausted heffins.com. Additionally, focus on risk management practices to reduce the chance of costly claims (for example, safety training to prevent accidents or clear HR policies to prevent employment lawsuits). By staying vigilant and adequately insured, you can manage the escalating liability costs going into 2026.

Looking Ahead: Strengthen Your Insurance Strategy for 2026

As we turn the page to 2026, take a moment to reflect on what 2025 taught you about your own risks. The challenges of the past year – from unprecedented natural disasters to cyber and legal perils – provide a roadmap for improving your insurance strategy in 2026. Make it a priority to review all facets of your coverage and risk preparedness. Consider these action steps as you plan for the year ahead:

• Reassess Climate Coverage: Update property, flood, and business interruption insurance to align with current climate realities; refine disaster response plans.
• Bolster Cyber Readiness: Implement strong cybersecurity protocols and obtain cyber insurance to protect against ransomware and data breaches.
• Increase Liability Protection: Review liability policy limits and consider umbrella coverage to guard against large lawsuits and verdicts.

Lastly, don’t go it alone. An independent insurance advisor or broker can provide a comprehensive review of your policies and identify gaps you may have overlooked. After a tumultuous 2025, partnering with an expert to connect and review your commercial insurance can give you peace of mind. By applying these lessons learned and planning proactively, your business will be better prepared to navigate risks in 2026 with confidence.

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