Asia Tops the World for Uninsured Natural Disaster Losses

Asia continues to be the most exposed region globally to natural disaster losses that are not covered by insurance, according to recent research. The insurance protection gap in Asia stands at a staggering 82.8%, meaning only a small fraction of the financial losses caused by climate-related disasters are insured. Latin America follows closely with an 81.0% gap, while North America, despite frequent severe weather events, has a significantly lower protection gap of 43.2%.

Natural Disaster Losses Outpace Insurance Coverage
A new report from MAPFRE Economics, presented at COP30, highlights that the frequency and severity of extreme weather events are increasing, driving higher economic losses. Since 1992, insured losses from these events have been rising annually by 5% to 7%. The report identifies key factors contributing to the growing gap, including limited insurance penetration in developing markets, rapid urbanisation in high-risk zones, and the intensifying impacts of climate change.

Key Findings from the Report
The report highlights the growing financial strain caused by “secondary perils” such as wildfires, droughts, and floods, which are occurring more frequently, but are individually less severe. These events now account for more than half of all disaster-related losses worldwide, putting additional pressure on infrastructure and local communities. In 2024, global economic losses from natural catastrophes exceeded $300 billion for the ninth consecutive year, with nearly $145 billion of those losses covered by insurance.

Bridging the Insurance Gap
According to MAPFRE’s analysis, addressing this insurance protection gap will require collaboration between insurance companies and government bodies. The report suggests that frameworks such as Spain’s Insurance Compensation Consortium could serve as useful models for Asia. Additionally, it discusses the importance of prevention incentives, early warning systems, and parametric insurance products that offer payouts based on specific triggers, to better address these gaps.

Disaster Risk Financing in Southeast Asia
A separate study by the ASEAN Secretariat reveals significant disparities in disaster risk financing across Southeast Asia. While countries like Indonesia and the Philippines have implemented advanced measures such as catastrophe bonds and national risk pools, other nations like Brunei and Cambodia are still in the early stages of developing disaster management frameworks. Insurance penetration remains below 10% in most ASEAN countries, constrained by economic, educational, and distribution challenges.