Draft, not yet released. In stewardship review. Not indexed until the first approved release.

Risks and capability

Four global risk objects open the portfolio. Order carries no rank. Each is read across driver, exposure, vulnerability, capacity, cascade and consequence; loss metrics are added only where they can be modelled.

7 min read0 figures1 table27 notesNR-STRATEGIC-INSURANCE-GLOBAL-2026-BASELINE

Contents
  1. ·Edition home
  2. ·Executive summary
  3. 1Protection gaps are shared risk
  4. 2Key findings
  5. 3Systems and sectors at baseline
  6. 4Risks and capability
    1. 4.1 Risk objects
    2. 4.2 Capability ladder
  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

4.1Risk objects

Each risk is read across the chain from hazard to consequence, with its status and evidence-quality level.

  1. InferredEQL 3RSK-SR06-FIN-001

    Large insured loss meeting soft reinsurance pricing

    Driver
    rising insured losses against falling reinsurance rates12
    Exposure
    insurers, reinsurers, lenders, households
    Vulnerability
    rates set before the next large event; thin retained capital in places
    Capacity
    record reinsurance capital reported2; public backstops
    Cascade
    CLI → FIN → DEV
    Horizon
    1 to 3 years

  2. ReportedEQL 4RSK-SR06-FIN-002

    Withdrawal of cover and growth of residual markets

    Driver
    higher nonrenewal rates in high-risk areas12
    Exposure
    homeowners in wildfire, storm and flood zones
    Vulnerability
    single-state schemes with growing exposure89
    Capacity
    assessment of insurers; transfers to private insurers9
    Cascade
    FIN → FIN → INF
    Horizon
    1 to 5 years

  3. ReportedEQL 4RSK-SR06-INF-003

    Lapse of a short-dated public flood scheme

    Driver
    authorisation to 11 December 2026 and lapse in 202510
    Exposure
    4.5 million policies and almost USD 1.3 trillion of coverage
    Vulnerability
    repeated short extensions; flood excluded from most home cover11
    Capacity
    policies in force stay active to term; borrowing limit falls to USD 1 billion10
    Cascade
    WAT → INF → FIN
    Horizon
    annual

  4. InferredEQL 3RSK-SR06-DAT-004

    Cyber accumulation in a young market

    Driver
    premiums close to USD 15 billion, forecast about USD 28 billion by 203019
    Exposure
    firms of all sizes in 20 surveyed countries
    Vulnerability
    shared technology dependencies; thin loss data
    Capacity
    reinsurance and risk engineering
    Cascade
    DAT → FIN
    Horizon
    1 to 5 years

4.2Capability ladder

Existence is not readiness. Each of the fifteen capability functions is placed on the ladder by the strongest public evidence at the global level, from a policy listing to performance in real events.

Table 4.1Capabilities on the ladder of evidence: listed, exists, demonstrated, tested
FunctionRungLevelStrongest public evidence at baseline
Prevention and mitigationEXISTSmitigation discounts and prevention rules in some schemes1816
Monitoring and observationADEQUATEannual loss reports by several publishers1234
Early warningLISTEDno common early warning of insurance withdrawal
Preparedness and planningEXISTSsupervisory standards and risk management guidance293031
Redundancy and reservesEXISTSrecord reinsurance capital reported at January 2026 renewals2
ResponseDEMONSTRATEDclaims paid after the 2025 losses and parametric payouts248
Continuity of critical servicesLISTEDcontinuity of cover after a scheme lapse not consolidated10
RecoveryDEMONSTRATEDscheme payouts after events; recovery times not consolidated4818
AdaptationEXISTShomeowner-level adaptation reported to cut insured loss1
Social protectionLISTEDincome support after uninsured loss not consolidated
Finance and insuranceEXISTSpublic, parametric and reinsurance schemes in many markets1648182532
Institutional coordinationEXISTSEU proposal and national frameworks; cross-border practice uneven14153537
Technical infrastructureEXISTScatastrophe models and scheme data systems; coverage uneven13
WorkforceLISTEDunderwriting and claims capacity not consolidated
Research capacityADEQUATEinsurance economics mature38394043
A capability listed in policy is not a tested one; each rung is the strongest public evidence at baseline.

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. 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
  3. 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
  4. 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
  5. 9News Service of Florida (ed.), report on Florida Citizens Property Insurance Corporation policy counts, 25 November 2025 (439,079 policies; peak of about 1.4 million in September 2023). Read through a television station republication. Observation year 2025. Accessed 2026-11-03.back
  6. 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
  7. 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
  8. 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
  9. 18Australian Reinsurance Pool Corporation (ed.), Cyclone Reinsurance Pool (commenced 1 July 2022; annually reinstated government guarantee of 10 billion, stated as dollars and read here as Australian dollars; mitigation discounts; cost-neutral to government over the longer term). ARPC, Canberra. Observation year 2022. Accessed 2026-11-03.back
  10. 16Flood Re (ed.), About us (reinsurance scheme for affordable flood cover in home insurance; planned to run until 2039). Flood Re, London. Observation year 2026. Accessed 2026-11-03.back
  11. 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
  12. 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
  13. 29UNVERIFIED, not opened: IAIS (ed.), Insurance Core Principles, Standards, Guidance and Assessment Methodology, adopted November 2019, cited from memory. International Association of Insurance Supervisors, Basel. Observation year 2019. Accessed 2026-11-03.back
  14. 30UNVERIFIED, not opened: IAIS (ed.), Application Paper on the Supervision of Climate-related Risks in the Insurance Sector, May 2021, cited from memory. International Association of Insurance Supervisors, Basel. Observation year 2021. Accessed 2026-11-03.back
  15. 31UNVERIFIED, not opened: ISO 31000:2018, Risk management: guidelines. International Organization for Standardization, Geneva. Observation year 2018. Accessed 2026-11-03.back
  16. 48CCRIF SPC (ed.), CCRIF in a Snapshot, brief revised April 2025 (78 payouts totalling about USD 390 million between June 2007 and April 2025; 30 members as of June 2024). The PDF was opened and its text read. CCRIF SPC, Grand Cayman. Observation year 2025. Accessed 2026-11-03.back
  17. 25Global Shield against Climate Risks (ed.), About (a financing structure for pre-arranged finance against disasters; Solutions Platform, Financing Facility and V20 multi-donor fund). Global Shield Secretariat. Observation year 2026. Accessed 2026-11-03.back
  18. 32UNVERIFIED, not opened: Pool Re (ed.), terrorism reinsurance pool of the United Kingdom, cited from memory; no figure used; the Pool Re page returned an access error. Pool Reinsurance Company, London. Observation year 1993. Accessed 2026-11-03.back
  19. 14EIOPA and ECB (eds.), Towards a European system for natural catastrophe risk management (publication page; 18 December 2024; proposes an EU public-private reinsurance scheme and an EU fund for public disaster financing). EIOPA, Frankfurt. Observation year 2024. Accessed 2026-11-03.back
  20. 15European Central Bank and Banque de France (eds.), press release on the ECB and EIOPA proposal for a European approach to natural catastrophes (18 December 2024; page updated 24 September 2026). Observation year 2024. Accessed 2026-11-03.back
  21. 35UNVERIFIED, not opened: Insurance Development Forum (ed.), public-private partnership of the insurance industry, the United Nations and multilateral bodies, cited from memory; the page returned no content and no figure is used. Observation year 2016. Accessed 2026-11-03.back
  22. 37UNVERIFIED, not opened: World Bank (ed.), Disaster Risk Finance and Insurance, topic page, cited from memory; the page returned navigation only and no figure is used. World Bank, Washington. Observation year 2026. Accessed 2026-11-03.back
  23. 13EIOPA (ed.), Dashboard on insurance protection gap for natural catastrophes (30 European countries; insurance coverage and economic loss data from 1980 to 2024; page updated December 2025). European Insurance and Occupational Pensions Authority, Frankfurt. Observation year 2024. Accessed 2026-11-03.back
  24. 38UNVERIFIED, not opened: Arrow, K.J., Uncertainty and the welfare economics of medical care, American Economic Review 53(5), 941 to 973, 1963, cited from memory. Observation year 1963. Accessed 2026-11-03.back
  25. 39UNVERIFIED, not opened: Akerlof, G.A., The market for lemons: quality uncertainty and the market mechanism, Quarterly Journal of Economics 84(3), 488 to 500, 1970, cited from memory. Observation year 1970. Accessed 2026-11-03.back
  26. 40UNVERIFIED, not opened: Rothschild, M. and Stiglitz, J., Equilibrium in competitive insurance markets: an essay on the economics of imperfect information, Quarterly Journal of Economics 90(4), 629 to 649, 1976, cited from memory. Observation year 1976. Accessed 2026-11-03.back
  27. 43UNVERIFIED, not opened: Froot, K.A., The market for catastrophe risk: a clinical examination, Journal of Financial Economics 60, 529 to 571, 2001, cited from memory. Observation year 2001. Accessed 2026-11-03.back

Cite this chapter

Valadbaygi, S. (Ed.). (2026). Chapter 4: Risks and capability. 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).

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