Spanish insurance giant Mapfre has told delegates at the COP30 summit that the future protections against the rising severity of climate driven weather events will need to be a public private partnership.

As the summit continued in the Brazilian city of Belem, the underwriter published a report which analysed the growing impact of climate change on “extraordinary risks” covered by the insurance industry, against a backdrop of intensification of extreme weather events and the widening of the insurance protection gap for natural disasters.

“Climate change represents one of the main challenges to social and economic stability, profoundly altering the nature and intensity of extraordinary risks,” the report explained. “These increasingly frequent and severe phenomena pose a growing challenge for the insurance industry and for traditional mechanisms of damage coverage and compensation.

“As our report highlights, catastrophic natural disasters are sometimes too large and potentially systemic for the private market or public sector to address on their own, resulting in natural disaster insurance gaps. Closing this gap undoubtedly constitutes a public policy challenge that must be addressed from a multifaceted perspective, requiring coordinated action by insurance companies and other stakeholders at all levels of local, national, and international government.”

It added there is now a growing  underinsurance gap and the world needs to take steps to address how that gap can be closed.

“On a global scale, Asia is the region with the largest insurance protection gap, with insurance contracts covering just 17.2% of total losses caused by natural disaster-related risks, based on the average over the past decade (2015-2024),” The report continued. “This implies a coverage shortfall of 82.8%. Next is Latin America, which shows an average gap of 81.0%.

“This stands in stark contrast to North America, which has the smallest protection gap, with an average of 43.2% of losses not covered by insurance contracts. In the specific case of the European Union, a joint study by the European Central Bank and the European Insurance and Occupational Pensions Authority (EIOPA) revealed that just a quarter of economic losses in the European Union were insured, and that this proportion was less than 5% in some Member States.”

Mapfre said there needed to be a concerted campaign to address the issue.

“Closing the insurance protection gap for catastrophic risks undoubtedly poses a public policy challenge,” it said. “This challenge must be addressed from a multifaceted perspective, requiring coordinated action by insurance companies and other stakeholders at all levels of local, national, and international government.

“International experience confirms that insurance and reinsurance companies can make a substantial contribution to managing the impacts of natural disasters by providing recovery funds in a timely manner and incentivising the reduction of risks.

“However, in the absence of the necessary protection and compensation measures and mechanisms, climate risks become uninsurable or unaffordable, meaning that the insurance gap not only fails to narrow, but sometimes even increases.

“In this regard, public administrations must collaborate, and even take the initiative, to adopt proactive public policies to maintain the feasibility of insurance markets and, at the same time, leverage insurance mechanisms to promote climate adaptation and loss prevention with a view to protecting the population and maintaining economic activity.”

“On a global scale, Asia is the region with the largest insurance protection gap, with insurance contracts covering just 17.2% of total losses caused by natural disaster-related risks, based on the average over the past decade (2015-2024),”