Geneva Association’s Schernberg: Insurers and Governments Urged to Rethink Risk-Sharing

Why It Matters

Without closing protection gaps, governments will shoulder escalating disaster costs, while poorly designed public‑private schemes could distort markets and hinder private insurance innovation.

Key Takeaways

• Protection gaps leave billions uninsured in natural, cyber, pandemic risks.
• Drivers: growing losses, demand bias, limited insurer capacity and regulation.
• Effective public‑private partnerships require fiscal, market, social, operational guardrails.
• Successful models (UK terrorism pool, France flood scheme) are context‑specific.
• Governments should prioritize risk mitigation and market support before PPIP backstops.

Summary

The Geneva Association’s latest report warns that widening protection gaps – the shortfall between total economic losses and insured losses – are eroding resilience across natural catastrophes, cyber attacks and pandemic‑related business interruption. Ellen Shernburgg explains that only about one‑third of the $7 trillion in property losses from 1980‑2024 were covered, with gaps ranging from 23‑60 % for disasters and virtually zero for cyber incidents. Key drivers include escalating loss magnitudes from climate change, urbanization and digitalization, a demand side bias that underestimates rare events and expects government bail‑outs, and supply‑side constraints such as capital requirements, data scarcity and regulatory caps that limit insurer capacity. Shernburgg cites concrete examples: a $1 billion flood where insurers paid only $300 million, the UK terrorism reinsurance pool that restores private capacity while keeping the state a pure back‑stop, and contrasting French and Californian earthquake schemes that illustrate divergent trade‑offs among fiscal, market and social guardrails. The report concludes that effective public‑private collaboration must be rules‑based, respect four guardrails, and be a last‑resort tool after governments pursue risk reduction and market‑strengthening measures. Mis‑aligned designs risk fiscal strain, crowding out private insurers and stifling innovation, underscoring the need for context‑specific frameworks rather than one‑size‑fits‑all templates.

Original Description

Hélène Schernberg, director of public policy and regulation at the Geneva Association, outlines how rising climate, cyber, and systemic risks are widening the gap between economic and insured losses.