The natural catastrophe protection gap is rapidly growing, reaching US$180 billion, with a 65% increase over five years, primarily driven by climate change, according to Zurich’s group chief strategy officer.
Paolo Mantero (pictured) delivered the sobering statistics at a keynote at Insurtech Insights Europe in London on Wednesday. He said climate change is creating more frequent and severe natural disasters, affecting both emerging and developed economies, with significant economic and social implications.
“Over the last five years, the market has been able to cover only 65% of the total risk exposure (to natural catastrophes,” Mantero said. “This is an astonishing growth rate, especially compared to the economy, which has only grown by 25% over the same period.”
While governments, companies, and individuals are taking action on the protection gap, risk management has been inconsistent, Mantero said. He cited high population growth rates in catastrophe-prone areas in the United States, such as Florida, where Hurricane Ian dealt significant inland flooding and damage to communities in 2022. Florida was the fastest-growing state in the US that year according to US census data, with a 1.9% growth rate between 2021 and 2022.
“These behaviors and failure to act have social and economic implications,” Mantero said. “It’s not just an insurance issue. The wider the gap, the more fragile the economy is.
“Companies will take longer to recover and devote resources to make up for the emergencies, instead of growing the business or investing in research. The impact is not just for companies that have been hit directly because, as COVID told us, the effect will spread quickly to the supply chains. Financial markets become more unstable. Recessions are more likely, as well as financial crises.”
Artificial intelligence was a natural talking point at the annual insurtech summit, billed as the largest in Europe, with more than 6,000 attendees this year.
Mantero said technical innovation, data-driven insights, and collaboration strategies should form the heart of insurance’s approach to natural catastrophe risk. AI and satellite imagery, for instance, can help predict and assess natural disaster risks. Alternative risk transfer programs like parametric insurance can offer faster payouts, while advanced forecasting models can provide earlier warnings for hurricanes and floods.
"We are just at the beginning of what technology can do," he said. "AI will certainly boost our capabilities many times over."
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