Natural catastrophe (nat cat) coverage is likely to remain a profitable, growing line of business for insurers and reinsurers in the long term, provided the industry keeps delivering innovative solutions backed by stronger public-sector schemes and a constructive regulatory framework, Fitch Ratings said in a new report published June 30.
Wealth creation, urbanization and climate change are the key drivers behind rising demand for nat cat coverage, Fitch said, adding that this demand is already not fully met. The rating agency expects economic and insured losses to keep growing faster than GDP over the medium to long term, creating both a business opportunity and a risk-management challenge for insurers and reinsurers.
Fitch said the global nat cat protection gap, the share of economic losses from disasters not covered by insurance, passed 60% at the end of 2025 and could widen further without product innovation and policy action, with emerging markets expected to be hit hardest. The agency projects that insured nat cat claims could climb to $186 billion globally by 2030, up from $107 billion in 2025, based on Swiss Re Institute data.
The estimate sits alongside Swiss Re's own recent figures, which put the global protection gap at $424 billion in 2025, up from $395 billion the previous year, even as the reinsurer's Natural Catastrophe Insurance Resilience Index, a measure of how much of the total protection needed is covered by private insurance, held broadly steady at 27.3%.
Fitch warned that affordability concerns, capacity constraints, a lack of reliable data, and gaps in legal frameworks could lead to long-term franchise losses for insurers if left unaddressed. To prevent this, the agency said policymakers, supervisors, insurers and reinsurers need to work together to scale up tools such as microinsurance, parametric coverage and insurance-linked securities (ILS).
Progress remains limited. Fitch noted that only around 50 million people, less than 2% of the target population, were covered by nat cat microinsurance products across 37 countries in 2024. ILS issuance has grown considerably, rising from about $1.4 billion a year between 2000 and 2004 to more than $14.1 billion a year between 2020 and 2024.
Fitch attributed the limited use of ILS outside the US to a lack of data and peril modeling capabilities, less favorable regulatory environments elsewhere, and the absence of the concentrated insured values seen in US catastrophe markets.
Adaptation measures, risk-sharing mechanisms and state-backed reinsurance schemes are critical to avoiding further widening of the protection gap, Fitch said. Regulators in several markets have already moved in this direction.
In Europe, the European Insurance and Occupational Pensions Authority has been consulting on proposals to reflect nat cat adaptation measures more directly within the Solvency II standard formula, changes Fitch said could be modestly credit-positive for insurers with meaningful property exposures if implemented, likely from 2027 at the earliest.
Fitch's report underscores that closing the gap will require sustained collaboration rather than a single fix, with insurers, reinsurers, capital markets and governments all needing to expand both the supply of coverage and its affordability for households and businesses in climate-exposed regions.
