| Hurricane Melissa highlights how climate risk is evolving in ways that are more complex, interconnected and, in some cases, unexpected. As attribution becomes clearer and losses increase, insurers face growing pressure on pricing, coverage and long-term insurability. This insight explores what this shift means in practice — and how Crowe can support organisations in strengthening their response. |
Hurricane Melissa was initially viewed as an extreme and unprecedented event, but the analysis that followed tells a more important story. The storm provides one of the clearest examples yet of how climate risk is already influencing the severity, likelihood and financial impact of natural catastrophes. For insurers, this shifts the conversation from future projections to present‑day loss outcomes, modelling assumptions and pricing decisions. Melissa is no longer just a hurricane case study, but a signal of how risk itself is changing.
In late 2025, when Hurricane Melissa made landfall in the Caribbean, the immediate focus was on response and recovery. However, in the weeks that followed, it unravelled that this was an example of the changing climate landscape that is increasingly shaping extreme weather outcomes.
Hurricane Melissa made landfall as a Category 5 storm and exhibited extreme physical characteristics, generating the highest wind gust ever recorded. Importantly for financial services, the World Bank estimates that the hurricane caused US$8.8 billion of physical damage in Jamaica alone. This equates to just over 40 per cent of the country’s 2024 GDP, making Hurricane Melissa the costliest hurricane in Jamaica’s recorded history.
Climate attribution and what it tells us about extreme weather risk
It is an existing challenge in the insurance industry to know what proportion of natural catastrophe claims can be attributed to climate change, and, historically, hurricanes have not come under the focus of climate change risk models. Hurricane Melissa changes this narrative. Post-event climate attribution analysis suggests that climate change played a measurable role in shaping the event.
Researchers at Imperial College London estimated that climate change increased Hurricane Melissa’s maximum wind speeds by approximately seven per cent, amplified its impacts with economic damage estimated to be 34 per cent higher, and made a hurricane of Melissa’s intensity around four times more likely, compared with a pre-industrial climate baseline.
What does this mean for Insurers?
Hurricanes are still poorly understood – but the climate link is getting clearer
Hurricanes are inherently difficult to model. They are shaped by a complex and evolving mix of atmospheric conditions, ocean temperatures and storm dynamics, and the way these factors interact is not always predictable. What is becoming clearer, however, is that warmer oceans are providing more energy for storms to intensify – sometimes rapidly and in ways that existing models do not fully anticipate. The science is still developing, but the direction of travel is consistent.
Climate risks are expanding – and challenging traditional models
Hurricanes were not always considered a key climate change risk – and yet here we are. At the same time, other perils, such as volcanic activity, are beginning to be linked to climate drivers. The boundaries of what counts as a “climate risk” are expanding. This creates a modelling challenge. As the interaction between climate change and individual perils is not always fully understood, there is a risk that exposure is being underestimated or mispriced – particularly where hazard behaviour is changing in ways not captured by historical data.
Attribution is moving from theory to practice
What makes Melissa different is not just its scale, but the speed and clarity with which attribution analysis was applied and communicated. It is one of the first major hurricanes where the public conversation explicitly included quantified estimates of climate change’s contribution. That is a shift. It means future events are increasingly likely to be examined through the same lens – and that insurers, regulators and the public will be asking harder questions about what was known, what was modelled, and what was priced.
Insurance penetration remains low – challenging affordability and long-term cover
The event exposed a significant protection gap: industry estimates suggest insured losses in Jamaica may total approximately US$2.2–4.2 billion, compared with total economic damage of around US$8.8 billion, reflecting low insurance penetration in climate-exposed regions. This gap matters because it limits the effectiveness of insurance in supporting recovery, shifts a greater share of the financial burden to governments and communities, and has direct implications for insurers’ long-term sustainability, regulatory scrutiny and risk-pooling capacity, as well as highlighting challenges around affordability, availability of cover and the long-term insurability of high-risk regions.
From insight to action - what should insurers do next?
Hurricane Melissa makes the case for moving from reactive to proactive climate risk management. In addition, regulatory expectations are evolving with increasing pressure on insurers to strengthen climate risk governance and demonstrate how climate considerations are embedded into decision-making. In the UK, supervisory expectations such as SS5/25 reinforce the need for a forward-looking approach to managing climate-related risks across strategy, risk management and governance frameworks, as explored in our Making your SS5/25 climate action plan meaningful insight. In practice, this means focusing on several areas:
Enhance your natural catastrophe models
Complement historical data with forward-looking climate scenario analysis to better reflect changing hazard profiles – including shifts in storm intensity, frequency and volatility that historical models may not capture.
Revisit pricing and coverage
Review whether you are charging the right amount and offering the right level of cover for risks like hurricanes, given changing climate conditions.
Protect insurability and pull the adaptation lever
As climate risks increase, there is a growing risk that insurance becomes too expensive or unavailable in some regions, widening the protection gap. Insurers need to manage this transition carefully. Similarly, insurers can maximise opportunities around product design and pricing incentives to encourage practical risk-reduction measures, including improved building standards, flood defences and repairs – reducing future losses and supporting long-term insurability. This is a core part of a Just Transition, supported by resilience and adaptation measures that help reduce future losses and maintain long-term insurability.
How Crowe can help
Hurricane Melissa shows climate risk is already hitting today’s losses, and attribution is making that impact measurable. The challenge now is understanding what this means for pricing, resilience and long-term sustainability.
Crowe supports organisations to respond in practice – embedding climate risk into decision-making and adapting strategy as the landscape shifts. If your organisation would like to explore how climate risk, transition planning and evolving regulatory expectations affect insurance strategy, please contact your usual Crowe contact.
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