From the Desk of the Secretary General – September 2023

by Jonathan Dixon

Amidst the growing frequency and intensity of natural disasters, the economic losses and societal hardship caused by climate change are intensifying. The impact is felt across the IAIS membership.

Despite the fact that insurance can substantially contribute to managing the financial impact of natural disasters, incentivise risk prevention and bolster macroeconomic and societal resilience, the NatCat protection gap – or the uninsured portion of economic losses caused by climate-related natural disaster – are expected to grow, as the impacts of climate change escalate.

Addressing insurance protection gaps in the face of catastrophic events is a complex societal challenge. Addressing this challenge will require a multi-stakeholder approach, including governments, the insurance industry and consumers. Alongside these parties, insurance supervisors can also play a crucial role in helping to mitigate the damaging effects of insurance protection gaps.

This year, the IAIS has issued a call for action for insurance supervisors to be part of the solution to NatCat protection gaps. In April, we issued a statement outlining our commitment to further supporting insurance supervisors in addressing protection gaps . In November, we will publish a report on the range of supervisory actions that can be taken to address challenges related to affordability, availability, and take-up of insurance coverage against NatCat events, underpinned by examples from IAIS member jurisdictions.

These activities could include contributing to the assessment of protection gaps, enhancing consumer financial literacy and risk awareness, incentivising risk prevention, fostering an enabling regulatory and supervisory environment to support insurance availability and coverage uptake, and advising government and industry on financial inclusion and societal resilience.

Whilst approaches to narrowing protection gaps may differ, the supervisory mandates to preserve financial stability and enhance policyholder protection already provide a robust basis for acting on protection gaps. For those supervisors with mandates to promote financial inclusion and market development, actions to address protection gaps are even more mission-critical.

We hope that the forthcoming report on the role of supervisors in addressing NatCat protection gaps will provide a basis for engagement amongst insurance supervisors, the insurance industry, policymakers and other relevant stakeholders on a concerted and coordinated approach. This will also be a key topic at our upcoming Annual Conference in Tokyo on 9-10 November. We look forward to the opportunity to progress the conversations with our members and stakeholders on this critical topic.