Disaster risks strain public-private insurance models globally

Report reviewed 14 programmes and found rising liabilities and weak incentives.

Public-private insurance programmes must do more to reduce risks if they are to remain viable as disasters become more frequent and costly, according to a new report by The Geneva Association.

The report said both natural and man-made disasters, including floods, wildfires, cyberattacks and pandemics, are increasing in frequency and severity. 

This is putting pressure on traditional insurance models and government relief systems, as uninsured losses rise and public finances come under strain. 

The study examined 14 public-private insurance programmes (PPIPs) and found that whilst many have helped stabilise markets and expand coverage, they face ongoing challenges. 

These include high financial liabilities, the risk of crowding out private insurers and limited incentives for policyholders to reduce risk exposure. 

The Geneva Association said effective PPIPs should balance four key objectives: ensuring access to affordable coverage, protecting public finances, encouraging private sector participation and enabling timely claims payments. 

Jad Ariss, managing director of the organisation, said such programmes should move beyond simply paying claims after disasters and instead focus on prevention and resilience. 

He said they need to strengthen incentives to reduce risk exposure and help societies recover more quickly whilst easing pressure on government budgets. 

Hélène Schernberg, director of public policy and regulation, said policymakers should follow a structured approach when designing PPIPs. 

This includes assessing the protection gap, prioritising risk-reduction measures and improvements to private insurance markets, and clearly defining the level of risk that governments are willing to absorb. 

The Geneva Association, whose members’ companies are headquartered in 26 countries, manages around $21t in assets and provides protection to 2.6 billion people, said stronger integration of risk reduction into insurance frameworks will be critical to maintaining affordable and reliable disaster coverage.