Underinsurance of property risks is a global challenge, says Swiss Re's latest sigma study Underinsurance of property risks: closing the gap. Much of the underinsurance is due to global natural catastrophe risk, which has risen steadily over the past 40 years. In the last 10 years, cumulative total damage to global property as a result of natural disaster events was USD 1.8 trillion, and about 30% of those losses were insured. In other words, the total shortfall in insurance cover – the protection gap – was USD 1.3 trillion. The sigma research also reveals significant property underinsurance for perils other than natural disasters, and that many high-growth markets are underinsured relative to the size of their economies. Here, while a rapidly growing middle class has been accumulating wealth, insurance buying still lags.
The global property protection gap against natural catastrophe risk has widened steadily over the past 40 years, even though claims payments have increased significantly in that time. With economic development and ongoing urbanisation, particularly in emerging regions, the value of global property at risk has outpaced the purchase of insurance.