In the world of commercial property insurance, what once was considered minor, secondary perils, has now become a major industry focus. Once manageable through traditional methods, events like hailstorms, wildfires, and flash floods are escalating in frequency and severity, driving new challenges in risk assessment and coverage.
Secondary perils are generally defined as natural events that cause damage but are not classified as primary catastrophes like earthquakes or hurricanes. They tend to be smaller in scale and more localized, affecting specific regions or property types. Examples include hailstones damaging rooftops, wildfires ravaging communities, flash floods inundating urban areas, and convective storms producing damaging winds and debris. While individually these events may seem less catastrophic than primary perils, their cumulative financial impact is now undeniable.
One of the key reasons secondary perils have become a pressing concern is their increasing frequency. This shift is driven by a combination of climate risks, urban development patterns, and aging infrastructure. For instance, climate change has led to more intense and prolonged wildfire seasons, more severe convective storms, and unpredictable heavy rainfall events. Warmer temperatures contribute to drought conditions followed by rapid, destructive wildfires, while increased moisture and atmospheric instability fuel more powerful thunderstorms.
These phenomena are no longer sporadic; they occur with alarming regularity, often catching property owners and insurers off guard.
According to a recent Aon report, global insured losses from natural catastrophes surpassed $100 billion in the first half (1H) of 2025 and reached at least $114 billion by the end of the third quarter (Q3). Over 90% of these 1H losses and nearly 90% of losses through Q3 were driven by wildfires and severe convective storms primarily in the United States. This data underscores a disturbing pattern: secondary perils are responsible for a significant share of insured damages, despite their perceived lower profile. The steady escalation in both the frequency and severity of these events signals a shift in risk exposure.
...secondary perils are responsible for a significant share of insured damages, despite their perceived lower profile. The steady escalation in both the frequency and severity of these events signals a shift in risk exposure.
Driving factors behind the shift
Several factors are contributing to the rising impact of secondary perils:
- Climate risk: The intensification of climate-related risks is perhaps the most significant driver. Elevated global temperatures lead to more frequent and severe convective storms, increased wildfire activity, and longer wildfire seasons. These changes in climate patterns alter the historical risk landscape, making secondary perils more unpredictable and damaging.
- Urban Sprawl and Development: As populations grow, development continues into hazard-prone areas -- such as floodplains, wildfire zones, and coastal regions -- often without adequate mitigation measures. This expansion increases the exposure of valuable properties to secondary perils, amplifying potential losses. The recent wildfires in Los Angeles highlight a critical issue: the growth of housing into the wildland-urban interface (WUI) has put thousands of valuable properties directly in high-risk areas. This expansion has turned what might have been natural wildfires into large-scale urban fires, resulting in significant property damage.
- Aging Infrastructure: Many buildings and infrastructure systems were constructed based on outdated codes or without considering evolving climate risks. For instance, many urban drainage systems were designed decades ago for smaller populations and less intense storms, and now their capacity is insufficient. This aging infrastructure is less resilient, leading to higher damage and repair costs when events occur.
- Environmental and Land Use Changes: Deforestation, wetland drainage, and other land use modifications reduce natural buffers that mitigate the impact of floods and storms. These changes often intensify the severity of secondary peril events. A study on the impacts of Hurricane Sandy in 2012 estimated that wetlands prevented over $625 million in property damages. In areas where wetlands had been lost or drained due to coastal development, the storm surge and associated damages were more severe, leaving inland communities more exposed.
How insurers are rethinking property risk
The growing threat of secondary perils has prompted insurers to reevaluate their strategies. Traditional approaches in which secondary perils were viewed as minor risks are no longer sufficient. Instead, insurers are adopting advanced risk assessment, pricing, and mitigation techniques:
- Data-Driven, Granular Pricing: Insurers are investing in sophisticated analytics and GIS to assess local exposures with precision. Factors like roof materials, elevation, vegetation, drainage, and historical weather are now integral to underwriting, enabling more accurate risk differentiation and pricing.
- Capacity and Policy Adjustments: In high-risk areas like California and Texas, insurers are tightening capacity, often imposing higher deductibles or limiting coverage for secondary perils. Some exclude these risks entirely or require additional endorsements.
- Policy Exclusions and Sublimits: Many carriers now incorporate exclusions or sublimits for secondary perils, encouraging property owners to seek supplementary coverage and adopt proactive risk management.
- Pre-Claim Mitigation Requirements: Insurers increasingly mandate risk mitigation measures—such as fire-resistant roofing, improved drainage, defensible zones, and vegetation management—to qualify for favorable policy terms, shifting focus toward resilience.
Proactive risk strategies
Given the evolving risk landscape, property owners and risk managers must adopt a proactive approach. Relying solely on insurance coverage is no longer enough; resilience depends on implementing risk mitigation strategies that reduce exposure and damage potential.
- Physical Hardening of Properties: Investing in physical upgrades is essential. Fire or ember-resistant roofing, vents, envelope, reinforced windows, and exterior walls can significantly reduce wildfire damage. Flood barriers, sump pumps, and elevating critical utilities help mitigate flood risks. Vegetation management—removing dead or drought-stressed trees and creating defensible zones—can prevent wildfires from spreading to structures.
- Leveraging Technology: Smart monitoring systems are crucial for early detection and response. Sensors that monitor rainfall, wind speed, or fire potential, combined with AI-powered alerts, enable timely action during severe weather events. Rapid notification systems can trigger evacuations, activate flood barriers, or shut down electrical systems to prevent damage.
- Routine Maintenance and Inspections: Regular checks of roofs, gutters, electrical wiring, and drainage systems identify vulnerabilities early. Proper maintenance extends component lifespan and reduces claims caused by neglect or minor issues.
- Engaging with Insurance Carriers and Brokers Early: Starting renewal discussions well in advance allows property owners to collaborate with brokers and insurers to find coverage aligned with their risk mitigation efforts. Brokers can advise on best practices and help secure policies that reward proactive measures.
- Exploring Parametric Insurance: When traditional policies are limited or costly, parametric insurance offers an alternative. These products pay out based on measurable weather parameters, such as rainfall or wind speeds, rather than actual damages. This provides quick liquidity after an event, enabling prompt response and repairs.
To enhance property resilience further, investing in advanced protection measures— smart prediction and prevention technology -- is vital. A proactive, integrated approach ensures better property protection and long-term sustainability.
Shaping tomorrow’s commercial property insurance
As climate risks continue to reshape the landscape, the insurance industry is leaning on smarter modeling techniques. Tools like climate models, scenario analysis, and machine learning will help insurers better predict layered risks and customize coverage.
Coverage might become more targeted or restrictive, focusing on risk prevention and resilience rather than broad indemnity. For example, wildfire coverage could include requirements like defensible space or specific building standards.
Innovative options like parametric insurance, which triggers payouts by specific weather events, are also gaining ground. These pay-outs are faster, less complicated, and particularly useful in areas hit repeatedly by secondary perils.
What used to be peripheral, secondary perils are now central concerns in commercial property insurance. Their increasing frequency and impact demand a proactive, multi-pronged approach. Physical hardening, tech solutions, regular maintenance, early planning, and new insurance models are all part of this shift.
The bottom line? Adaptation and resilience are no longer optional. They're vital for survival in this unpredictable climate.
The future of commercial property insurance depends on collaboration—anticipating, preparing for, and tackling secondary perils head-on. Embracing innovation, data, and proactive resilience will be key to thriving in this new environment. The game has changed. Those who adapt will be best positioned to succeed.
Learn more
Listen to Billy Volz discuss Secondary Perils with Justin Smulison on this episode of RIMScast: Secondary Perils, Major Risks: The New Face of Weather-Related Challenges
To learn more about ways business can predict and prevent property loss, visit the AXA Digital Commercial Platform.
