Climate-related disasters caused an astronomical $120 billion (Sh15.47 trillion) in damages worldwide in 2025, with developing nations, such as Kenya, facing the brunt of the economic toll. These countries, already struggling with limited resources, found themselves unable to recover due to a severe “protection gap,” where less than 5% of such losses were insured.
Vulnerable Nations Bear the Cost
The devastating economic consequences of climate change are becoming increasingly apparent. A report from global insurers Munich Re reveals that the economic damage from floods, wildfires, droughts, and other climate events in 2025 is significantly more than just an environmental issue—it’s an economic crisis. From Nairobi’s floodwaters to wildfires in Australia, these extreme weather events are not only destroying homes and infrastructure, but also setting back economic progress by years, especially in nations least equipped to cope.
In Kenya, for example, the toll of the ongoing El Niño rains is still being assessed, but early estimates suggest it has already cost the country approximately 1.5% of its GDP growth for the year. For farmers, this means total loss, as droughts and unpredictable weather patterns wipe out entire crops, without compensation or the possibility of insurance payouts to cushion the blow.
A Global Disparity: Africa’s Unfair Burden
The report underscores the stark contrast in the financial impact between the Global North and Global South. While the wealthy nations of the world may experience higher absolute losses in dollars, the effect on GDP is far more devastating in countries like Kenya, where the damage caused by extreme weather is often a larger percentage of national income. The Sh15 trillion in global losses in 2025 actually surpasses the entire GDP of East Africa’s seven-nation bloc, highlighting the disproportionate impact on poorer regions.
“We are paying for a fire we did not start,” said Ephraim Shitima, chair of the African Group of Negotiators, pointing out that much of the responsibility for these disasters lies with wealthier nations that have contributed most to global carbon emissions. Without urgent action, the gap between rich and poor nations will continue to widen, with vulnerable countries having to divert critical funds from sectors like health and education to rebuild after each climate catastrophe.
The Munich Re report calls for the immediate activation of the Loss and Damage Fund agreed upon at COP29, which aims to financially support those most affected by climate events. However, this fund has yet to be fully operational, and until it is, nations like Kenya will remain in a perpetual cycle of economic vulnerability.
As the world faces an escalating climate crisis, it is clear that the costs are far from abstract. They are real, immediate, and crippling—especially for those least able to afford them.
