The Case for Water Insurance: Securing a Critical Resource and its Infrastructure

Introduction: The Rising Importance of Water and Its Insurability

Water is fundamental to life, economic productivity, and environmental stability. However, it is increasingly under threat from a combination of climate change, urbanization, industrial demand, and aging infrastructure. These pressures have highlighted the fragility of water systems and the growing need to protect them. As both a vital resource and a capital-intensive infrastructure asset, water demands a financial safety net. That safety net is insurance.

Historically, water systems were treated as public utilities or engineering challenges. Today, they are emerging as critical assets in the fight for climate resilience and sustainable development. The argument for insuring water and water-related infrastructure lies in their financial value, vulnerability, and societal necessity. This report contends that both water resources and the technologies that manage, treat, and distribute water must be fully integrated into insurance frameworks.

Water Markets Are Expanding Rapidly — And So Are the Risks

The global water market is experiencing steady, reliable growth. Valued at $880 billion in 2023, it is expected to reach $1.3 trillion by 2032. This growth is propelled by increasing population density, industrialization, and the escalating need for climate adaptation across the globe.

A more focused segment—the water and wastewater treatment industry—shows even faster expansion. From $347 billion in 2024, it is set to grow to $597 billion by 2032. This rapid rise reflects investment in water reuse, stricter pollution controls, and broader infrastructure development initiatives.

The combined market for water treatment services and systems is a particularly promising area. Between 2025 and 2032, water treatment services are projected to grow from $75 billion to $120 billion. At the same time, water treatment systems will expand from $45 billion to $78 billion, showing that both operational services and physical technology are on a robust upward trajectory.

Investment Surge Signals Rising Need for Risk Mitigation

Investment trends in the water technology sector highlight its growing attractiveness. Venture capital interest has surged, with 2024 witnessing deal values approaching $140 million. This increase is not a blip but part of a broader movement as investors flock to scalable and sustainable water solutions.

Alongside increased funding, the regional distribution of investment has broadened. North America has historically led the market, but Europe and Asia are rapidly expanding their stake, reflecting a shared global urgency to invest in water innovation. Technologies in water reuse, desalination, and digital monitoring have emerged as particular favorites.

Private Capital and Public Policy — Dual Catalysts for Water Security

As the world ramps up its investment in water infrastructure, both public and private sectors are stepping up. In 2024, approximately $4 trillion was allocated globally to water security, with the private sector contributing $1 trillion. By 2034, total investment is expected to reach $13 trillion, with private capital increasing to $7 trillion.

This increasing private investment necessitates mechanisms to safeguard financial exposure. Insurance provides a critical layer of protection for investors, governments, and operators alike. Infrastructure projects, particularly those that are decentralized or experimental, are subject to operational, financial, environmental, and regulatory risks that demand comprehensive coverage.

Identifying Insurance-Ready Water Markets

A global comparison reveals a wide variation in readiness for water insurance adoption. Countries with high water availability and mature financial sectors represent optimal environments for water insurance products. For example, Canada and Norway demonstrate a strong balance between water abundance and market readiness.

Meanwhile, other regions grapple with water scarcity, adding urgency to the case for insurance. Countries like the United States and Switzerland, though facing high water stress, also possess well-developed insurance sectors capable of delivering innovative solutions to manage that stress.

An integrated view of these indicators points to Canada, Norway, Peru, and Chile as particularly strong candidates for rapid insurance development in the water sector.

Why Water Systems and Water Tech Need Insurance

Water treatment plants, sensor networks, and desalination systems represent significant capital investments. These systems are exposed to a wide array of risks including mechanical breakdown, cyberattacks, regulatory non-compliance, and extreme weather events. Given their importance and vulnerability, the absence of insurance in these sectors represents a critical gap.

Insurance can address these vulnerabilities through tailored coverage options: physical asset protection, business interruption insurance, environmental liability, and even cyber risk insurance for digitally integrated water networks. These offerings help stabilize revenue flows and lower the risk profile of water infrastructure projects, making them more investable and operationally resilient.

Climate Risk and Insurance Innovation

Water-related climate risks, including droughts, floods, and ecosystem collapse, are now core concerns for governments and businesses alike. As these threats escalate, so too does the importance of insuring against them. Traditional insurance products must evolve into tools of climate adaptation.

Innovative insurance offerings are emerging to meet this need. These include index-based drought insurance, performance guarantees for decentralized systems, and contingent business interruption coverage. These tools enable stakeholders to manage climate volatility while promoting investment in new infrastructure.

The Role of Private Equity and Long-Term Capital

Private equity plays a unique role in scaling water innovations. While venture capital helps develop early-stage technologies, private equity facilitates the integration and expansion of those solutions into large-scale infrastructure platforms.

Leading firms have already begun establishing water-focused investment platforms, demonstrating the sector’s capacity for delivering strong returns. Insurance can serve as both a risk mitigation tool and a growth enabler, protecting assets and unlocking new financing opportunities.

Policy Frameworks and Multi-Stakeholder Action

Resilient water systems require coordinated action across governments, financial institutions, and the private sector. Policymakers are increasingly aligning with this goal, recognizing the need to embed insurance in long-term water infrastructure planning.

As water moves to the center of the global climate agenda, insurance must become part of the policy conversation. Insurance-backed infrastructure bonds, sovereign risk pools, and insurance-linked securities for water resilience are just a few examples of how financial instruments can accelerate sustainable development.

Water Insurance Potential Index and Market Identification Methodology

To evaluate opportunities in water insurance, a composite index was developed using four key variables across 40 countries: water per capita, percentage of wastewater treated, water stress (logarithmic scale), and insurance maturity (proxied by insurance and financial services exports as a percentage of commercial service exports).

Two cross-comparative models were used to visualize the opportunity space:

1. Water per capita vs. insurance maturity.

2. Water stress vs. insurance maturity.

These dimensions allowed for the identification of countries with either a pressing need or a robust market capacity for water insurance deployment. The final index combined these variables to produce a ranked list of nations with high potential for insurance innovation in water.

Conclusion: A Blueprint for Securing the World’s Most Vital Resource

Water is no longer just a natural resource or a public utility—it is a strategic asset. Its increasing value, vulnerability, and complexity make it an ideal candidate for innovative insurance solutions. As infrastructure investment accelerates, insurance will become an indispensable component of water system resilience and economic security.

By protecting both the physical infrastructure and the water resources themselves, insurance ensures continuity, enables financing, and supports long-term sustainability. The future of water security hinges not just on engineering and policy, but also on finance and risk management. Insurance is the missing link—and its time has come.

Sources & References

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Financial Times. (2024). Climate investors see growing opportunities in water tech. https://www.ft.com/content/516f9896-05bb-4721-a9e2-4065d902d462 

PitchBook. (2025). PitchBook Analyst Note: Water Tech. https://pitchbook.com/news/reports/q3-2025-pitchbook-analyst-note-water-tech 

Smart Water Magazine. (2025). Private equity's expanding role in the water sector: key players, investments and strategic exits. https://smartwatermagazine.com/news/smart-water-magazine/private-equitys-expanding-role-water-sector-key-players-investments-and 

World Bank. (2025). Water Security Dashboard. https://wbwaterdata.org/dataset/water-security-dashboard 

World Economic Forum. (2025). 3 start-up founders on the need and opportunities for investing in water innovation. https://www.weforum.org/stories/2024/09/3-founders-on-the-need-and-opportunities-for-investing-in-water-innovation/ 

World Economic Forum. (2025). Water Futures: Mobilizing Multi-Stakeholder Action for Resilience. https://reports.weforum.org/docs/WEF_Water_Futures_Mobilizing_Multi_Stakeholder_Action_for_Resilience_2025.pdf 

World Resources Institute. (2023). 25 Countries, Housing One-Quarter of the Population, Face Extremely High Water Stress. https://www.wri.org/insights/highest-water-stressed-countries