Collaboration key to narrowing protection gap: David Howden

David Howden, Founder and CEO of Howden, explains that the insurance industry, regulators, and policymakers must collaborate to bridge the insurance protection gap, safeguard financial stability, and ensure a long-term, resilient insurance market.

Factors such as the frequency of pay-outs, difficulty raising premiums, and the assumption that the government will cover the risk, when combined, make insurers’ business models unviable and force them to withdraw coverage from high-risk areas.

This protection gap is widening at a time when it is needed more than ever. For instance, in Europe, more frequent and severe rainfall has made flood insurance harder to obtain, while in California, wildfires have destroyed neighbourhoods and devastated businesses. Howden estimates that approximately 50% of economic losses will be uninsured, compared to around 25% for the recent large-scale wildfires in California.

However, Howden highlights a recent Howden Re report that suggests narrowing the protection gap is possible through “old-fashioned collaboration” by strengthening the bond between regulators, insurers, and homeowners.

He explains, “That means regulators giving carriers the flexibility to increase their prices – so they’re not forced to pull out of the market and homeowners can get the coverage they need.

“That means better risk mitigation – whether it’s disaster planning, forest and land management or stricter adherence to building codes.

“And it means better risk transfer – pooling risks though public private partnerships, harnessing the unique talents of MGAs to redeploy capacity and, of course, innovation, innovation, innovation.”

Howden’s analysis shows that $75 billion in economic losses could be halved with a $6 billion upfront investment.

“This offers a glimpse into the sheer power of collaboration,” said Howden. “Uniting regulation, risk management and risk transfer to deliver long-term insurability. As the costs and dangers of living in high-risk areas continue to rise, insurance will continue to be key to speeding up recovery. It should also be a critical component of adaptation – incentivising resilient behaviour with better terms for policyholders.”

Julian Alovisi, Head of Research at Howden, said, “As climate risks continue to evolve, insurers must be more agile and innovative in how they approach risk. However, this change cannot happen in a vacuum and collaboration is needed to restore balance and ensure long-term insurability. This is not just an insurance issue – it’s an economic and social imperative.”

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