We can no longer afford a Global Protection Gap Communities, homes, properties and businesses are under threat, collaboration is the key to mitigating the threat. The consequences of the Global Protection Gap are far-reaching, left unattended it will have a catastrophic effect on humanity, the global economy and it’s interconnected financial system. The catastrophic weather, seismic, pandemic, cyber, terrorism and population migration risks now facing humanity, businesses and communities are staggering and very real. Now more than ever governments around the world, starting with the G20, must act to collaborate and partner with private sector players (insurers/reinsurers) to address and close the Global Protection Gap. The numbers associated with the Global Protection Gap are indeed sobering:
70% of Natural Catastrophe losses globally were uninsured between 1980-2017
In the US only 1% of the properties outside of flood zones have flood insurance, yet half of the US floods occur outside these areas.
The future protection gap is estimated at more than US $150 Billion per year or about . 25% of global GDP
Global insured losses from disaster events in 2017 totaled a record US $144 billion. More staggering was the additional US $193 billion in uninsured losses. The total global economic losses from natural disasters and man-made catastrophes reached US $337 billion in 2017. 2017 was the costliest single year ever for insured losses, with economic losses at the second highest level ever recorded. Fast forward to 2020 there were 416 natural catastrophic events globally which resulted in economic losses of US $268 billion, 8% above the average annual losses for this century, according to insurance broker Aon’s catastrophe loss report. Of this total, Private sector and government-sponsored insurance programs covered US $97 billion, leaving a protection gap of 64%. The Global Protection Gap is based on total economic losses caused by natural and man-made events; LESS, the dollar amount of those losses actually covered by insurance. More often than not the economic cost of catastrophic natural and man-made loss events are not insured or are woefully under insured. The financial consequences of no insurance or under insurance are significant and more often than not are left to Governments (the taxpayers) to fund (pay for). The fact that under/no-insurance is a reality means many individuals, businesses, communities and all levels of government (municipal, provincial, state, federal) lack the awareness and
education on the VERY REAL risks that they face. Nor do they appreciate and understand the disastrous effects under/no-insurance can have on human life, businesses, communities, countries and the global financial system. Our planet is now exposed more than ever to frequent catastrophic Mother Nature and man-made loss events. These events are growing both in terms of their severity and frequency, not to mention the financial costs and hardship inflicted on people, businesses, communities and countries. I do believe that individuals, businesses and governments can take steps to significantly reduce the Global Protection Gap. This isn’t a wishful thought. Today there are many examples from the past and present of how the Public and Private sector have partnered and collaborated to mitigate risks and fund post loss events. The following are some examples of where the Public and Private sector have piloted, legislated, cooperated, collaborated, partnered to address the Global Protection Gap:
Caribbean Catastrophe Risk Insurance Facility (CCRIF).
Terrorism Risk Insurance Act (TRIA)
National Flood Insurance Program’’s Reinsurance Program https://www.fema.gov/floodinsurance/work-with-nfip/reinsurance
ARC Replica, Senegal 2020 https://reliefweb.int/report/senegal/arc-replica-payoutsenegal-2020-internal-evaluation
Pacific Catastrophe Risk Insurance Company (PCRIC) https://pcric.org
African Risk Capacity (ARC).
Kenya Livestock Insurance Program
Disaster Risk Finance & Insurance Program
Climate Risk Insurance Initiative (InsuResilience)
More Public-Private partnerships should be created to raise awareness of, address and solve the Global Protection Gap. Much can be learned from the partnerships that have both succeeded and failed to create new successful partnerships between the Public and Private sectors. Through education, research, cooperation and collaboration, the Public (government) and Private (insurers/reinsurers) sectors can work together to significantly narrow the Global Protection Gap to build more resilient communities and countries and thereby spare significant hardship and financial pain!