IAIS highlights role of supervisors in addressing nat cat protection gaps

Insurance supervisors can play an essential role in supporting disaster risk assessment and risk management practices and addressing protection gaps, according to a statement released by the International Association of Insurance Supervisors (IAIS) on the role of supervisors in addressing natural catastrophe protection gaps. The IAIS notes that enhancing resilience against intensifying natural disasters is a pressing challenge for jurisdictions across the globe. “The damage and economic losses caused by natural catastrophes are increasing, partly driven by growing exposures in high-risk areas. As the impacts of climate change intensify, this could result in even greater damages, leading to increased protection gaps, which often disproportionately affect vulnerable people and are felt more severely by emerging markets and developing economies,” the statement says. The IAIS says this underscores the increasing importance of building and improving resilience against natural disasters. It notes the significant role of (re)insurance in managing the financial impact of natural disasters, as well as providing incentives for risk adaptation, mitigation and preparedness before a disaster. “Besides such microeconomic benefits, insurance also contributes to macroeconomic resilience by helping to absorb the negative financial impacts on the economy after a natural disaster,” the IAIS adds. But it explains that addressing natural catastrophe protection gaps requires shared efforts of both the public and private sectors. “Issues such as insurability and affordability can be challenges for, or limits to, insurance-based solutions; increased intensity and frequency of natural catastrophes could further exacerbate such issues,” it says. “Insurance supervisors have a mandate to protect policyholders, promote the maintenance of fair, safe and stable insurance markets and to contribute to financial stability. The supervisory mandate could also include the promotion of insurance market development or financial inclusion. Within these various mandates, supervisors can play an essential role in supporting disaster risk assessment and risk management practices,” the statement reads. The association provides a number of examples of initiatives underway in IAIS member jurisdictions, including: Supporting availability of risk analytics and data to assess disaster risks and insurance protection gaps; Providing incentives or implementing regulation to encourage risk prevention measures and actions to improve financial literacy and risk awareness; and Contributing to the design and/or implementation of public-private initiatives aimed at addressing natural catastrophe insurance protection gaps. The IAIS says that by the end of 2023 it will publish a report that analyses the various types of initiatives undertaken by insurance supervisors to address natural catastrophe protection gaps. The report will draw from examples and insights from IAIS members, the insurance industry, international organisations and other stakeholders, with a view to distilling the key elements of current good practices.

IAIS highlights role of supervisors in addressing nat cat protection gaps

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