06 November 2023

IAIS outlines actions for insurance supervisors in addressing natural catastrophe protection gaps

The frequency and intensity of natural catastrophe (NatCat) events are expected to grow due to climate change, this may challenge the insurability and affordability of insurance coverage – leading to increasing protection gaps.

• Insurance helps build resilience to natural disasters. But, as the frequency and intensity of natural catastrophe (NatCat) events are expected to grow due to climate change, this may challenge the insurability and affordability of insurance coverage – leading to increasing protection gaps.
• Addressing NatCat protection gaps is a complex societal challenge requiring a multi-stakeholder approach, including governments, the insurance industry and consumers. Alongside these parties, insurance supervisors can also play an essential role.
• The IAIS highlights that insurance supervisors have a strong basis for supervisory action to help narrow NatCat protection gaps in support of their various supervisory mandates.
• The report outlines five significant areas where supervisors can help address NatCat protection gaps, underpinned by examples of action already underway by IAIS members. It also provides a basis for further engagement amongst insurance supervisors and stakeholders and outlines concrete follow-on actions.

Basel, Switzerland – The International Association of Insurance Supervisors (IAIS) today published its report A call to action: the role of insurance supervisors in addressing natural catastrophe protection gaps.

The report outlines why natural catastrophe (NatCat) protection gaps – the uninsured portion of economic losses caused by natural disasters – matter for insurance supervisors and presents a range of possible supervisory actions to improve affordability, availability and uptake of insurance coverage against NatCat events.

As NatCat events become more frequent and intense due to climate change, protection gaps are expected to grow. “Insurance, including reinsurance, can substantially contribute to managing the financial impact of natural disasters, thus enhancing societal resilience,” said Shigeru Ariizumi, IAIS Protection Gaps Task Force Chair and recently elected Executive Committee Chair. “It provides financial protection against damage, aids in recovery and reconstruction and can incentivise adaptation, risk mitigation and preparedness. Against this backdrop, there is a role for supervisors to play in supporting the important societal function of insurance in addressing NatCat protection gaps.”

The report outlines five major areas of supervisory activity that can contribute to addressing NatCat protection gaps, supported by case studies from jurisdictions spanning all IAIS regions. These are:

• Contributing to the assessment of protection gaps;
• Enhancing consumer financial literacy and risk awareness;
• Incentivising risk prevention;
• Fostering an enabling regulatory and supervisory environment to support insurance availability and coverage uptake; and
• Advising government and industry on financial inclusion and societal resilience.

IAIS

© IAIS - International Association of Insurance Supervisors