Insurance cover growing broadly in line with increasing natural catastrophe risk: Swiss Re

While the global natural catastrophe insurance protection gap is estimated to have risen to US $424 billion in 2025, new research from Swiss Re’s Institute suggests that insurance coverage is growing at a rate broadly in line with the increasing catastrophe exposure.

Swiss Re said that both insurance and adaptation efforts are critical to narrowing the global natural catastrophe protection gap and importantly the reinsurance company highlights that adaptation projects have a median projected benefit-cost ratio (BCR) of 1.86, a benefit of almost twice every US dollar invested.

Economic growth and the increasing value of assets exposed to natural catastrophe risks is the main driver of the insurance protection gap.

Swiss Re’s Institute explained, “We find insurance coverage is growing at a rate broadly in line with increasing natural catastrophe risk: our SRI Natural Catastrophe Insurance Resilience Index rose to about 27% in 2025, up from about 25% in 2015, a modest but significant improvement.”

But, nearly three quarters of global exposure is still uninsured according to the research, highlighting the need for more risk capital, as well as efforts to expand insurance coverage around the world.

Swiss Re said that its Natural Catastrophe Insurance Resilience Index, which measures insurance coverage and estimates how the availability of private insurance capacity covers the protection needed, based on modelled expected losses, has risen modestly to about 27% in 2025, up from around 25% in 2015.

The nat cat protection gap has risen though, from US $395 billion in 2024 to the new level of US $424 billion in 2025, but the proportion of protection needed was broadly unchanged year-on-year.

“Protection needed and protection available have both risen, with the latter doing so at a slightly faster pace due to rising insurance penetration. Yet, in absolute terms, the protection gap continues to grow, as there is simply more to protect,” Swiss Re’s Institute said.

Insurance coverage for natural catastrophe risks has risen in certain advanced markets, with the natural catastrophe insurance resilience index rising to 41.3% in 2025 from 37.1% in 2015 for advanced EMEA, and to 29.1% from 22.5% for advanced Asia Pacific.

In North America the insurance coverage ratio has been relatively stable at 40-42% since 2015, Swiss Re notes, but this comes against a backdrop of a widening protection gap driven by large absolute exposure growth.

US property reconstruction cost increases are part of the problem in the country, while in some areas insurance penetration for certain catastrophe perils has been falling, one example being California where just 12% of residential property insurance policies included earthquake coverage in 2024, down from 30% at the time of the Northridge Earthquake in 1994, Swiss Re highlights.

If the long-term growth trend for insured losses globally continues at its 5-7% annual pace, Swiss Re warns that insured losses could reach US $186 billion by 2030 globally, up from US $107 billion in 2025.

“To improve resilience and reduce the natural catastrophe protection gap, insurance coverage must be increased to transfer risk, and expected economic losses must be reduced,” Swiss Re’s Institute said.

Adding that, “Targeted adaptation can reduce expected losses and help to improve the conditions for insurance availability and insurability. It can lower physical vulnerability and help to reduce the risk that catastrophic risks become uninsurable over time.”

The Institute concludes that, “The right mix of adaptation measures, clearer appraisal standards, and market incentives that reward risk reduction, may support further improvement in the global insurance coverage (resilience index) ratios even as exposure rises. An integrated approach that combines insurance coverage with risk-adaptation measures in exposed areas, can narrow natural catastrophe protection gaps.”

While it is encouraging that insurance coverage is growing at a similar pace as the protection gap for natural catastrophes, the exposure growth is likely to persist with more assets exposed alongside expanding economic activity and perhaps accelerate given the inflationary environment as well.

As ever, the gap highlights opportunity for the insurance, reinsurance and insurance-linked securities (ILS) industry as well, with the need for more coverage evident.

While narrowing the protection gap has been a key talking point for the industry in recent years, meaningful progress in closing it is not being made.

It’s going to take innovation, alongside much greater adaptation efforts, more efficient use and deployment of the right capital and an open mind to leveraging the capital markets appetite for natural catastrophe risk, if the rising levels of exposure being seen around the world are ever to be overtaken by the rate of insurance penetration growth.