APAC disaster insurance trails G7 at 0.83% of GDP

Governments, businesses and households must absorb costs that policies do not pay.

Asia-Pacific economies have less insurance cover against natural disasters than major developed markets, leaving governments, businesses and households more exposed to rising physical risks, Moody’s said.

Across the region, insurance cover is equivalent to an average of 0.83% of GDP. This compares with 2.38% of GDP across the G7 countries (France, the United States, the United Kingdom, Germany, Japan, Italy, and Canada).

The gap between total economic losses and the amount covered by insurers is generally wider in developing economies, where insurance take-up is lower. 

It can increase further as these economies grow and the value of exposed assets rises.

Uninsured losses are still paid by governments, companies and households. Moody’s said these unexpected costs can reduce investment, slow economic growth and place pressure on public finances.

Globally, the economic impact of physical risks could reach $41.4t in less than two decades as sea levels rise and natural disasters become more frequent and severe. Much of this damage may not be covered by insurance.

Economic losses from natural catastrophes have already increased over recent decades. Based on a US model, Moody’s estimates that average annual damage from acute physical climate risks could rise by as much as 26% by 2050.

Emerging markets are also expected to continue growing faster than the global average in 2026. 

However, low insurance penetration means that much of the new wealth and infrastructure created by this growth remains uninsured. As a result, insured losses are rising more slowly than overall economic losses.