The IAIS has published an input paper developed with the World Bank Group for the G20 Sustainable Finance Working Group (SFWG) focussed on identifying and addressing natural catastrophe (NatCat) protection gaps.
The paper, titled “G20 Sustainable Finance Working Group input paper: Identify and address insurance protection gaps, July 2025”, recognises that Nat CAT protection gaps are a global challenge, affecting both advanced and emerging market and developing economy (EMDE) jurisdictions, and therefore require global responses.
With the frequency and severity of Nat CAT events such as hurricanes, typhoons, wildfires and floods continuing to rise, the economic and social toll is increasingly unsustainable. EMDEs face disproportionately higher protection gaps due to low insurance penetration, affordability challenges, underdeveloped insurance markets and insufficient access to risk models and data.
The input paper serves as a “guide for action” to help jurisdictions narrow Nat CAT insurance protection gaps. The paper outlines practical and implementable actions that governments, supervisors, and the insurance industry can take, with a particular focus on EMDEs.
Key insights from the IAIS and WBG input paper
Foundational steps: The paper highlights foundational actions essential for effective insurance-based solutions, including:
- Building capacity to assess exposure to NatCat events and protection gaps.
- Implementing risk-based and proportionate supervisory frameworks.
- Improving financial literacy and risk awareness.
- Incentivising risk reduction through measures like disaster-resistant building codes and resilient infrastructure.
Insurance-based solutions: The paper emphasises the transformative potential of innovative insurance solutions to reduce risk and limit economic losses, such as:
- Parametric insurance: Quick payouts based on predefined triggers.
- Microinsurance: Affordable products designed for low-income populations.
- Risk transfer mechanisms: Tools like catastrophe bonds, reinsurance, and regional risk pools to spread risk and increase affordability.
Collaboration is key: Public-private insurance programmes (PPIPs) are identified as a critical component of the solution, leveraging the strengths of governments, supervisors, insurers, and civil society to deliver targeted and scalable solutions. M