Closing the widening insurance protection gap in the face of increasing natural catastrophes requires a concerted, multi-stakeholder approach anchored on public-private partnerships, investment in resilience, and the adoption of innovative risk-transfer mechanisms.
This was the overarching message from a G20 South Africa side event recently held in Durban.Organised under the South African G20 Presidency in collaboration with the International Association of Insurance Supervisors (IAIS) and the World Bank Group (WBG), the high-level convening took place alongside the G20 Finance Ministers and Central Bank Governors (FMCBG) meetings.
It brought together policymakers, central bank and insurance supervisors, private sector players, and international organisations to explore viable strategies to tackle the escalating global protection gap in natural catastrophe (NatCat) insurance.
The protection gap—the difference between total economic losses and insured losses from natural disasters has become a global concern. As of 2023, the global insurance protection gap stood at 62 percent , with some emerging market and developing economies (EMDEs) experiencing gaps exceeding 90 percent.
This alarming trend reflects the mounting vulnerability of communities and economies, especially in EMDEs, to the financial shocks of increasingly frequent and severe weather events, many of which are driven by climate change.
Keynote speakers at the Durban forum underscored the rising economic toll of NatCat events and the growing strain on public budgets and vulnerable populations. They warned that failure to act decisively would continue to expose countries particularly those with limited fiscal space to devastating losses.
In response, participants repeatedly emphasised that bridging the protection gap demands more than just traditional insurance market solutions. Instead, a multi-dimensional framework is needed—one that leverages diverse actors, including governments, regulators, insurers, development partners, and communities. This collaborative model would integrate risk reduction strategies with insurance tools, expand access to inclusive products, and build systemic resilience against climate-induced disasters.
The forum spotlighted the role of innovative insurance models in expanding coverage. Among the emerging solutions discussed were parametric insurance—which triggers payouts based on predefined parameters rather than claims assessments—regional risk pooling mechanisms, and flexible financial instruments that adapt to changing risk profiles.
Speakers also drew attention to the critical role of regulatory capacity, financial literacy, and public awareness in supporting robust insurance ecosystems. Effective regulation and supervision, they noted, are essential for fostering trust in insurance products and ensuring the financial soundness of insurers. Meanwhile, increased awareness and education at the community level can promote uptake of insurance and enhance preparedness.
During a panel discussion, stakeholders shared global case studies of effective public-private partnerships, particularly in designing post-disaster response frameworks and integrating technology into insurance delivery. The use of data analytics, early warning systems, and mobile-based platforms were cited as powerful tools for improving access to and performance of insurance solutions in underserved regions.
There was consensus that scalable, inclusive, and context-sensitive insurance products—designed with the input of all stakeholders—are key to reducing vulnerability and achieving financial protection outcomes in the wake of natural disasters. Moreover, the integration of insurance with climate adaptation, infrastructure planning, and social protection frameworks was identified as a critical pathway toward sustainable resilience.
Speakers welcomed the ongoing technical support and knowledge sharing provided by international bodies such as the IAIS and WBG. Their collaborative work in developing practical guidelines, risk assessment tools, and supervisory frameworks was acknowledged as instrumental in supporting policymakers and regulators particularly in EMDEs in tackling protection gaps and advancing inclusive insurance agendas.
As global risks grow more complex, the Durban event reaffirmed the need for coordinated global action rooted in shared responsibility. In the face of intensifying NatCat events, bridging the protection gap is not only an insurance imperative but also a strategic priority for economic resilience and social equity worldwide.
