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Protection gaps are shared risk

Part I describes systems and their couplings. It ranks no country or operator and assesses no authority.

6 min read2 figures1 table10 notesNR-STRATEGIC-INSURANCE-GLOBAL-2026-BASELINE

Contents
  1. ·Edition home
  2. ·Executive summary
  3. 1Protection gaps are shared risk
    1. 1.1 The questions this part answers
    2. 1.2 The argument
    3. 1.3 Twenty couplings between five systems
  4. 2Key findings
  5. 3Systems and sectors at baseline
  6. 4Risks and capability
  7. 5Large insured loss that meets soft pricing and thin backstops
  8. 6Readings from the other desks
  9. 7The 2027 agenda
  10. 8Systems in depth
  11. AMethodology
  12. BData appendix
  13. CReferences and record
  14. ·Complete edition, for print

1.1The questions this part answers

Key questions

  • Where is insurance and protection gaps risk concentrated?
  • Which couplings carry insurance and protection gaps shocks into other systems?
  • Which insurance and protection gaps capabilities hold under compound stress?
  • What must 2027 evidence measure first?

In this part

  • Narrative
  • Headline finding
  • Lead figure
  • Five mechanism chapters
  • Twelve-domain reading
  • Sector screens
  • Dependency matrix
  • Risk objects
  • Capability ladder
  • Scenario
  • Three lenses
  • Portfolio

1.2The argument

Insurance is usually reported by line: property, health, crop, cyber. The 2025 and 2026 evidence reads it as one system that moves loss between households, firms, insurers, reinsurers and governments. When cover thins, the loss lands on the next party in line14810.

The causes repeat. Secondary perils such as wildfire, severe storm and flood made up 92% of 2025 insured losses1. Exposure grows 5% to 7% a year in real terms17. Take-up of cover is low in many markets: Munich Re puts insured losses at USD 9 billion of about USD 73 billion in Asia-Pacific2.

Availability is changing in rich markets too. In the United States, nonrenewal rates were about 80% higher in the highest-risk ZIP Codes12, and the California FAIR Plan reached USD 773 billion of exposure8. The flood programme runs on short authorisations10.

The edition asks the same four questions of every event: what was the common cause, how did loss spread, what was shared, and what threshold was crossed. It rates no insurer and ranks no market.

Figure 1.1How much of 2025 natural catastrophe loss was uninsured? Percent of economic losses

Three readings give a gap of 51% to 56%. The Swiss Re bar is an editor derivation, method (5). Scope differs, so the bars show a range and are not averaged134.

ItemBar, scaled to the largest valueValue
Gallagher Re56
Aon, record low51
Swiss Re, derived from 49% insured51

Source: as cited in the note to this figure. Year 2025.

Figure ID FIG-STRATEGIC-INSURANCE-GLOBAL-2026-BASELINE-01-003

56%

uninsured, Gallagher Re4

51%

uninsured, Aon3

≈49%

insured, Swiss Re1

≈167USD billion

uninsured loss, Gallagher Re4

1.3Twenty couplings between five systems

The insurance and protection gaps-centred matrix types the twenty couplings between the five core systems, read for their insurance and protection gaps content. Strengths are Nexus estimates (ESTIMATED) from the cited evidence and analogue events; they set the graph that 2027 evidence will test.

Figure 1.2Couplings between the five systems

Each line is one coupling from one system to another, drawn by the strength the edition assigns. Strengths are Nexus estimates from the cited evidence and analogue events.

  • Strong
  • Moderate
  • Weak

Source: this edition’s coupling matrix (Table 1.1); status Estimated.

Table 1.1Coupling matrix: from the row system to the column system
From, toWATENEFOOHLTBIO
WAT Water·MODERATE
flood and cooling loss		STRONG
flood and drought crop loss		MODERATE
flood health claims		WEAK
flows
ENE EnergyWEAK
pumping		·MODERATE
cold chain and business interruption		WEAK
hospital power		WEAK
land use
FOO FoodWEAK
withdrawals		WEAK
bioenergy		·WEAK
nutrition		WEAK
land conversion
HLT HealthWEAK
workforce		WEAK
workforce		WEAK
labour		·WEAK
residues
BIO BiodiversityMODERATE
natural buffers		WEAK
hydrology		WEAK
pollination		WEAK
zoonoses		·
Strength: strong, moderate or weak; a Nexus estimate (status Estimated) from cited evidence and analogue events. The scale is defined in Annex A.

Transmission paths

  1. 01

    CLI → FIN → DEV

    Secondary perils raise insured losses while take-up stays low in some markets.

    Reported 202512

  2. 02

    FIN → FIN

    Nonrenewal pushes policies into a residual market.

    Reported FAIR Plan 20268 · FIO12

  3. 03

    WAT → INF → FIN

    Flood falls outside homeowners cover and onto a short-dated public scheme.

    Reported NFIP 2025 to 20261011

  4. 04

    FIN ↔ TRD

    Reinsurance pricing responds to capital and recent losses.

    Reported renewals 20262

  5. 05

    DAT → FIN

    A young cyber market grows from a small base.

    Reported 202519

Notes

Numbers are the edition’s reference numbers, so a note reads the same in every chapter. The full list, with every source and its licence, is in Annex C. Annex C, references

  1. 1Insurance Journal and Reinsurance News (eds.), reports of Swiss Re Institute, sigma 1/2026, Natural catastrophes in 2025: the persistent rise of wildfire and storm risk (insured losses USD 107 billion; economic losses USD 220 billion; 92% from secondary perils; Los Angeles wildfires USD 40 billion; trend 5% to 7% a year; 2026 normal level USD 148 billion and peak scenario about USD 320 billion), articles of March 2026. The sigma report itself was not opened; the Swiss Re page returned an access error. Observation year 2025. Accessed 2026-11-03.back
  2. 4Reinsurance News (ed.), report of Gallagher Re, Natural Catastrophe and Climate Report, full year 2025 (insured losses USD 129 billion; economic losses USD 296 billion; protection gap 56% or USD 167 billion; United States USD 100 billion or 78%). The Gallagher Re report was not opened. Observation year 2025. Accessed 2026-11-03.back
  3. 8California FAIR Plan Association (ed.), Key Statistics and Data (September 2026: 698,307 policies in force; exposure USD 773 billion; written premium USD 2.04 billion; policies up 157% and exposure up 252% since September 2022). California FAIR Plan Association, Los Angeles. Observation year 2026. Accessed 2026-11-03.back
  4. 10Congressional Research Service (ed.), What Happens If the National Flood Insurance Program (NFIP) Lapses?, Insight IN10835, version of 11 September 2026 (authorised to 11 December 2026; 36 short-term reauthorisations since FY2017; lapses 1 October to 12 November 2025 and 1 to 3 February 2026; borrowing limit USD 30.425 billion; nearly 4.5 million policies; almost USD 1.3 trillion coverage). Library of Congress, Washington. Observation year 2026. Accessed 2026-11-03.back
  5. 7Artemis (ed.), report of Swiss Re Institute insurance market outlook, July 2025 (inflation-adjusted natural catastrophe exposure growth of 5% to 7% a year, faster than premiums). The outlook itself was not opened. Observation year 2025. Accessed 2026-11-03.back
  6. 2Insurance Journal, Insurance Business and Reinsurance News (eds.), reports of Munich Re, natural disaster losses in 2025, 13 January 2026 (overall losses about USD 224 billion; insured about USD 108 billion; Asia-Pacific about USD 73 billion overall and USD 9 billion insured; Africa about USD 3 billion; January 2026 reinsurance rates down 14.7%). One article printed USD 244 billion for overall losses, a typographical conflict with USD 224 billion elsewhere. The Munich Re release was not opened. Observation year 2025. Accessed 2026-11-03.back
  7. 12US Department of the Treasury, Federal Insurance Office (ed.), Homeowners insurance report, press release of 16 January 2025 (more than 330 insurers; 246 million policies; 2018 to 2022; ZIP Code level; nonrenewal rates about 80% higher in the highest-risk ZIP Codes). The report itself was not opened. Observation year 2022. Accessed 2026-11-03.back
  8. 3Aon (ed.), 2026 Climate and Catastrophe Insight (page read to character 100,000 of 220,843: economic losses USD 260 billion; insured losses USD 127 billion; protection gap 51%, a record low). Aon, London. Observation year 2025. Accessed 2026-11-03.back
  9. 11FEMA (ed.), FloodSmart (most homeowners insurance does not cover flood damage; almost one third of NFIP claims come from outside high-risk flood areas, stated as 29%). Federal Emergency Management Agency, Washington. Observation year 2026. Accessed 2026-11-03.back
  10. 19Munich Re (ed.), Global Cyber Risk and Insurance Survey 2026 (premium volume nearly USD 15 billion in 2025; about USD 28 billion forecast for 2030; over 9,500 respondents in 20 countries). Munich Re, Munich. Observation year 2025. Accessed 2026-11-03.back

Cite this chapter

Valadbaygi, S. (Ed.). (2026). Chapter 1: Protection gaps are shared risk. In Strategic Systems Report 2026: Insurance, Protection Gaps and Insurability (Baseline Edition 2026, Report No. NR-STRATEGIC-INSURANCE-GLOBAL-2026-BASELINE) [Draft under review]. The Global Centre for Risk and Innovation (GCRI).

Every citation form of the whole report, BibTeX and RIS included, is on the edition home. Cite this report

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