What do you think when you hear the term, natural catastrophe (nat cat) protection gap? The recent earthquake in Nepal? Typhoon Haiyan in the Philippines? Chances are, you associate the issue more with developing countries.
You may be surprised to learn that the U.S. currently has the largest protection gap among countries globally. According to a new Swiss Re Sigma report, “Underinsurance of property risks: closing the gap,” the annual expected uninsured losses from earthquake, flood and wind damage in the U.S. (the largest nat cat perils) total more than $30 billion, based on Swiss Re’s natural catastrophe models. This means that, of the total estimated natural catastrophe losses in the U.S. of $55 billion annually, more than half aren’t insured.
Such modeling of future risks is vital as underlying risks don’t always show up in historical event data. For example, Florida hasn’t seen a major hurricane in more than a decade, but still has a high risk.
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