The global insurance industry has been issued with a rallying call to cooperate to tackle a growing protection gap.

The message came from the London & International Insurance Brokers’ Association (LIIBA), as it today published a new report which highlights specialty brokers are critical to closing the world’s widening protection gap and enabling the insurance industry to keep pace with emerging risks.

The report, The Innovation Imperative: Why Brokers Matter More Than Ever warns that the widening protection gap is driven by an “innovation gap” – the mismatch between the speed emerging risks are evolving and the pace at which the market can develop insurance solutions to manage these risks.  It added specialty brokers are central to closing this gap, but without stronger support from regulators, government and the wider market, their ability to innovate will be constrained.

“The consequences of this innovation gap are already visible,” it cautioned.

It added a new breed of emerging risks are leaving businesses exposed in areas where traditional insurance has failed to keep pace and are contributing to a protection gap shortfall estimated at $2.5 trillion in 2022.

Specialty brokers, the report argues, are uniquely placed to address this challenge. Far from being merely “distributors of risk”, they are the insurance industry’s research and development (R&D) function — the first to identify emerging risks, aggregate client demand, and build the data frameworks that make cover possible. They also feed lessons from claims back into product design.

The report, which interviewed over 200 senior specialty brokers from around the world, reveals that they now devote a quarter of their time to innovation-related activities – from risk consultation and product design to advanced data modelling – matching the time they spend on placement activities. Innovation also happens frequently, with 56% of respondents saying they regularly innovate multiple times. This dual focus highlights how central innovation has become to the broker role.

Examples include the creation of cyber insurance products, cover for renewable energy projects, political risk solutions, and supply chain resilience programmes. In each case, brokers’ close relationship with clients and ability to aggregate and interpret data has been decisive in creating new markets where underwriting capacity alone could not.

Christopher Croft, CEO of LIIBA, (pic) and author of the report, said while brokers are driving innovation, the report warns that they face structural, regulatory, and cultural barriers that risk constraining their ability to keep pace with the scale of change.

The research revealed that the value brokers bring is still not fully understood — particularly among regulators who are less immersed in the industry, and clients who too often judge them on cost alone. Awareness is also limited within the market itself: 41% of underwriters admitted they understood brokers’ roles only “quite well” or “not very well,” rising to 66% among risk managers.

Croft said: “Specialty brokers are the connective tissue of the global insurance market. They act as strategic advisers – identifying emerging risks, building the data to make them insurable, aggregating demand for new solutions and uniting diverse sources of capital. In doing so, they translate client needs into workable coverage and make insurance an enabler of growth and resilience.

“Despite the central role brokers play, appreciation of their contribution remains weak. Regulators and others outside the industry often overlook the breadth of what brokers do, and this needs to be communicated far more effectively across the value chain if brokers are to secure the support, they need to drive innovation and deliver change.”

The report urges regulators, insurers and governments to act decisively. Regulators must expand sandbox environments for supervised experimentation and modernise licensing frameworks to allow expertise to flow more freely across borders. Insurers and capital providers should establish dedicated innovation pools to support solutions for emerging risks. Broker investment in analytics, data and product development should be recognised and rewarded as genuine R&D.

The report also calls for cultural change. The industry must adopt lessons from the technology sector by introducing faster feedback loops, modular product design, and greater tolerance for experimentation. Collaboration across the value chain will be essential if the market is to keep pace with a rapidly evolving risk landscape.