The amount of financial loss caused by catastrophes not covered by insurance is growing, according to the latest Swiss Re sigma report.
This so-called global insurance protection or funding gap totaled $75 billion in 2014.
The rate of growth of total losses has outpaced the growth of insured losses over the course of the last three decades, Swiss Re notes:
Here’s the Swiss Re visual showing global insured vs. uninsured losses from natural catastrophes and man-made disasters from 1970 to 2014:
Lack of insurance cover clearly remains an issue in many countries.
Swiss Re gives the example of low pressure system Yvette last May which brought very heavy rain in Europe to Serbia, Bosnia and Croatia — in some areas the heaviest downpour in 120 years. Yvette resulted in 82 fatalities, the largest loss of life from a natural catastrophe in Europe in 2014, and total losses were estimated to be $3 billion — mostly uninsured.
Areas of the United States are also underinsured, sigma reports. Last August’s South Napa earthquake caused structural and inventory damage of $0.7 billion, particularly in the numerous local wine barrel storage facilities. However, the insured loss was just $0.16 billion.
As Lucia Bevere, co-author of the sigma study, notes:
In spite of high exposure to seismic risk, insurance take-up in San Francisco County and California state generally is still very low, even for commercial properties. That’s why insured losses, in certain areas, can be surprisingly low when disaster events happen.”
Meanwhile, the economic cost of natural disasters continues to rise due to economic development, population growth, a higher concentration of assets in exposed areas and a changing climate.
Without a commensurate increase in insurance penetration, the above will likely result in a widening protection gap over the long term, sigma concludes.
I.I.I. has more facts and statistics on global catastrophes available here.