Global risk consultant Aon has urged a deeper dive into what they see as a growing problem that can be addressed only by extending the reach of insurance and reinforcing the industry’s stature.

The concern is for the widening protection gap — the difference between insured and uninsured losses, particularly as it refers to natural catastrophes.

Hurricanes, winter storms, floods and earthquakes have become more frequent and more intense, wreaking financial havoc.

But there remain communities and businesses without adequate cover, and in many cases, without any insurance when catastrophes occur.

Swiss Re’s recent sigma report said that in 2023 only 38 per cent, or $108 million, were insured of the global economic losses of $280 billion.

Swiss Re said: “With climate change causing hazard intensification, asset accumulation and ever more people living in high-risk areas, impacts from natural catastrophes will only continue to grow.”

Aon’s report, Reinsurance Market Dynamics, relating to the January 2025 reinsurance renewals, comments: “The protection gap continues to widen across a range of exposures, with increasing frequency and severity of extreme weather events, adverse litigation trends, emerging technologies and increasingly large, complex and interconnected commercial risks.

“Warning signals are flashing. Captive premiums have jumped as corporates retain more risk, while voices calling for public sector intervention in natural catastrophe and cyber-risks are getting louder.”

The report refers to a joint paper released last month by the European Insurance and Occupational Pensions Authority and the European Central Bank, which proposed an EU public-private reinsurance scheme.

EIOPA says the proposal is a response to the growing frequency and severity of natural catastrophes and to address the future affordability of insurance.

The Aon report said: ”From US homeowners struggling to insure their properties against wildfires, storms and floods to public entities unable to buy law enforcement liability cover, or corporates facing reduced limits for US casualty, the challenge for our industry is adequately pricing the risk to attract capital as the pool of insurable risks grows.

“Yet, today’s evolving landscape presents the industry with a huge opportunity to increase our relevance and to grow. Billions, if not trillions, will be invested in transition, climate adaptation and new technologies like artificial intelligence in coming years.

“Insurers are keen to develop solutions and play their historical role as enablers of innovation, investment and economic development. But insurers will not be able to do so without the support and expertise of reinsurers.”

Aon believes the market has to make the move to engage with other stakeholders to extend the reach of insurance, and reinforce the industry’s stature as they address each challenge, one at a time, to close the gaps.

The company said: “We are already making strides in this regard. Aon recently partnered with the United Nations Capital Development Fund and Lloyd’s to launch a pioneering vehicle to deliver disaster risk financing to Pacific island states; the long-term aim is to scale up and replicate the vehicle throughout the Pacific region as well as the Caribbean, Asia and Africa.

“On flood risk, we recently collaborated with flood risk specialist Fathom to enhance Aon’s Climate Risk Monitor modelling tool, helping insurers to understand the influence of climate change on flood perils and its insurability.

“Aon has been a massive supporter of the efforts in aiding Ukraine. In June we worked with the Development Finance Corporation of the US Government to provide a first-of-its-kind war reinsurance facility for Ukrainian insurance carriers to allow them to support insureds, vital in the rebuilding of the Ukrainian economy.

“Aon also supported the European Bank for Reconstruction and Development in developing an innovative war risk insurance facility for Ukraine, which is intended to stimulate business activity and economic growth by revitalising the private war risk insurance market in Ukraine.

“Working with energy companies in the UK, Aon developed a first-of-its-kind insurance product for international transport and storage companies that are engaged in carbon capture and storage — the product, which advances the role of insurance in de-risking global CCS projects, is designed to work for such projects globally.”