Assess protection gaps and exposure to NatCat risk

Assessing protection gaps and exposure to NatCat risk is foundational for developing effective insurance solutions. This principle is highlighted in the G20 Sustainable Finance Working Group input paper (2025) and the G7 High-level Framework for Public-Private Insurance Programmes against Natural Hazards.  Both emphasise that a thorough assessment of protection gaps is a critical first step, paving the way for exploring actions such as public-private insurance programmes (PPIPs).

A key element of this process is evaluating a jurisdiction’s exposure to natural hazards and understanding the underlying drivers of risk. This includes analysing current and projected economic losses from NatCat events, as well as the availability and affordability of insurance coverage. Addressing protection gaps requires a deeper understanding of financial vulnerabilities, including the extent of private and public sector exposure to damages, the take-up of insurance, and the broader financial impacts of uninsured risks. Such gaps can affect creditworthiness, strain public finances, and reduce resilience across communities.

This assessment must also identify barriers to insurance availability and uptake, such as high exposure to losses, challenges in risk quantification, low financial literacy, and the expectation of government compensation. Collaboration between governments, insurance supervisors, insurers, and private enterprises is essential to leverage expertise and data. Supervisors, in particular, can play a vital role by using their market insights and regulatory authority to collect and analyse relevant data. Advances in technology can further enhance risk assessments by improving the availability and quality of data.