61% of insurance leaders say industry failing to keep pace with climate risk

The insurance industry is falling behind in preparing for climate-driven risks as adoption of artificial intelligence (AI) is slow.

That was according to research from ZestyAI, which found that 61% of executives are saying the industry is not adapting to climate-related risk fast enough.

The firm published its findings in its 2025 State of Property Insurance report, which was put together based on a survey of more than 220 property and casualty (P&C) executives.

It found that 68% of executives say advanced AI models help manage climate-related losses more effectively and that nearly three quarters say AI is opening new revenue opportunities and improving underwriting.

However, only one in four cite AI as a primary method for managing perils and a number of carriers report having no model at all.

And despite 83% of leaders saying they feel equipped to use it, AI adoption remains uneven - only 40% of carriers have embedded AI into core workflows.

”Many insurers continue to lean heavily on legacy actuarial and stochastic models, even though these frameworks were designed for a more stable risk environment and do not capture today’s clustered, compound and property-specific loss patterns,” the report said.

”The survey found that 41% of executives say stochastic models are the most accurate tools for predicting risk, compared to 20% for AI.”

Conclusion

The report concludes that to keep the stability of property insurance intact, carriers need to modernise peril models with property-level precision ”before the next billion dollar loss” and integrate AI into underwriting, pricing and claims workflows.

Attila Toth, founder and chief executive at ZestyAI, said: “The industry is still modelling risk as if little has changed, even as climate volatility accelerates.

”Relying on yesterday’s tools is leaving insurers exposed to today’s billion-dollar events, from urban wildfires to catastrophic hailstorms.

“AI-driven, property-specific models don’t just predict risk more accurately. They also show how mitigation changes outcomes, giving insurers, regulators and policyholders the transparency they need to build resilience. As we look to 2026, the industry faces a choice, continue relying on models built for yesterday’s risks, or embrace a future where every property can be understood, priced and protected on its own terms.”