Catastrophe capacity is becoming cheaper and more plentiful, but hundreds of billions of dollars of exposure still goes uninsured each year, highlighting the gap between capital available to the insurance market and coverage that ultimately reaches businesses and households.
Insurance covered less than half of global catastrophe losses in every year from 2015 through 2025, with 57.8% of losses uninsured over the period, a new Moody’s analysis found. That gap persists even as conditions further up the insurance chain have become markedly more favorable.
Global reinsurer capital reached a record $785 billion at the end of 2025, up almost 10% from a year earlier, Aon estimates. At the July 2026 renewals, global property catastrophe pricing fell further, with Guy Carpenter’s rate-on-line index moving from a 12% decline at January 1 to a 16% decline at mid-year as abundant capacity increased competition.
Some cedents are using those conditions for more than rate relief. Guy Carpenter said insurers were exploring parametric solutions and sidecars alongside traditional protection, while greater capacity was supporting broader coverage options.
Moody’s found the protection gap is widest for risks capable of producing severe losses across large numbers of policyholders at once. In the US, about 84% of earthquake exposure remains uninsured, reflecting a combination of optional coverage, cost and relatively low take-up.
Insurers must still price catastrophe risk at levels that can support claims, capital requirements and returns, while reinsurers face similar constraints when taking concentrated exposure. Where the economics remain difficult, additional market capacity may not be enough to overcome affordability problems or low demand for coverage.
The scale becomes clearer under a severe-loss scenario. Moody’s estimates that a one-in-200-year aggregate US catastrophe event could generate more than $400 billion of insured losses and more than $1.1 trillion of total losses to insurable property, leaving a protection gap of roughly $700 billion.
That potential loss is substantial compared with insurance-sector capital, but much smaller relative to the wider investment market. Global bonds and equities totaled about $319 trillion at the end of 2025, according to Moody’s.
The disparity is helping draw more outside capital into insurance risk.
Insurance-linked securities allow institutional investors to assume catastrophe exposure without requiring traditional insurers and reinsurers to carry all of it on their own balance sheets. Total ILS market capital reached US$144.5 billion in the 12 months to June 30, 2026, while outstanding catastrophe bond volume reached US$63.4 billion. Cat bond issuance totaled a record US$24.9 billion over the same period.
The effect is already visible in reinsurance buying. Excess catastrophe capacity has given some insurers scope to purchase additional protection, reconsider retentions and restore coverage that was harder or more expensive to secure during the harder market following Hurricane Ian.
Yet the broader protection gap continues to widen. Swiss Re estimates the global natural catastrophe protection gap reached US$424 billion in 2025, up from US$395 billion a year earlier. Natural catastrophes caused US$107 billion of insured losses in 2025, with about 49% of total economic losses covered—the highest share recorded by Swiss Re. Even that relatively strong level of insurance penetration left more than half of losses uninsured.
The figures also illustrate why softer market conditions should not be mistaken for lower underlying catastrophe risk. Swiss Re said 2025 losses were below their long-term trend despite continued growth in exposure, while its modeling shows insured losses could reach about US$320 billion in a peak-loss year.
Moody’s expects further ILS growth as catastrophe modeling, transaction standardization and access to analytics improve.
That leaves the protection gap as more than a question of how much capital is available. The challenge is also where that capital can be deployed, how risks are priced and whether coverage remains affordable enough to be taken up.
