Report reveals huge Asian protection gap

Report reveals huge Asian protection gap

Report reveals huge Asian protection gap A new report published by global disaster modelling firm Air Worldwide has revealed the shocking extent of the protection gap across Asia.

The report states that of losses related to natural disasters over the previous year, US$8.3 billion was insured across the continent with a whopping US$89.47 billion left uninsured.

Compared with the mature United States market, which saw approximately half of its economic losses from natural disasters covered by insurance, insured losses in Asia made up just 9% highlighting the low insurance uptake across the region.

“The sizable difference between insured and economic losses - the protection gap - represents the cost of catastrophes to society, much of which is ultimately borne by governments,” the report states.

“Increasing insurance penetration can ease much of the burden, while providing profitable growth opportunities for the insurance industry.

“In situations where insurance is not feasible or cannot be offered at an affordable price, catastrophe modelling can be used to inform emergency management, hazard mitigation, public disaster financing, risk pooling, and other government-led risk and loss mitigation initiatives to enhance global resilience.”

The firm found that since 1990, global insured losses have made up about a quarter of global economic losses on average, when trended to 2014 dollars. Average annual insured losses for all regions and all perils have steadily increased since the first report was published in 2012.

In addition, the report stressed that while the protection gap may be a challenge, it presents the industry with a host of opportunities.

“For the insurance industry, the protection gap can spur innovation in new product development,” the report continues.

“In the public sector, governments are recognizing the importance of moving from reactive to proactive risk management, especially in countries where a risk transfer system is not well established.”

As businesses become increasingly interconnected and as supply chains stretch across the continent and throughout the rest of the world, the report notes that a global outlook on the impact of disasters is needed.

“Since catastrophe risk can threaten a company’s financial well-being, companies operating on a world stage need to understand their risk across global exposures to ensure they have sufficient capital to survive years of very high loss,” it states.

“Understanding – owning - this risk requires knowing both the likelihood of high-loss years and the diversity of events that could produce such losses. In addition, companies with global exposures and an expanding global reach should prepare for the possibility that future catastrophes will produce losses exceeding any historical amounts.”

Related stories:
Pru Life Philippines launches policy to help close protection gap
Aid agency and insurers cooperate to provide cover for earthquake-prone areas