Regulators pushed to boost insurance protection for climate risk

(Bloomberg) –The global insurance standards body is calling on national regulators to do more to increase financial protection for people and businesses exposed to natural catastrophes, as climate change spurs more damaging storms, floods and fires.

In a report published Monday, the International Association of Insurance Supervisors outlined key areas where supervisors can help improve the affordability, availability and uptake of insurance against natural disasters.

Insurance “can substantially contribute to managing the financial impact of natural disasters, thus enhancing societal resilience,” Shigeru Ariizumi, chair of the IAIS protection gaps taskforce, said in a statement. The group’s membership includes insurance supervisors from more than 200 jurisdictions, constituting 97% of the global insurance premiums. 

Many households and businesses have little or no insurance protection against extreme weather. About 75% of global risk was unprotected in 2022, according to Swiss Re Institute’s natural catastrophe resilience index. While emerging markets are the least protected, large areas of the developed world are also exposed. Almost 90% of natural disaster-driven losses in Europe weren’t covered by insurance in the first half of 2023, according to Munich Re. Insurers are backing away from writing new homeowner policies in several US states.

The IAIS said supervisors could address the problem by better identifying insurance gaps, offering incentives for risk protection, educating consumers, and using regulation to improve the uptake of insurance policies.

Such measures provide “a robust basis for acting on protection gaps,” said Jonathan Dixon, IAIS secretary-general. The group said it will also collaborate with partners such as the Organization for Economic Co-operation and Development and the Global Shield against Climate Risks.