Experts highlight critical role of re/insurance in closing crisis protection gap

The High-Level Panel on Closing the Crisis Protection Gap has emphasised the crucial role of all forms of insurance in increasing the share of prearranged crisis finance tenfold by 2035, particularly for least developed countries and small island developing states.

In its newly released report, Crisis Protection 2.0: Future-Proofing Our World, the High-Level Panel, a group of 20 leaders from across sectors and geographies, observed that the crisis protection gap is widening.

It has therefore outlined recommendations for facilitating change over the next decade, which included actions for governments, public finance providers, international financial institutions, public and private insurance providers, and civil society.

For those unaware, pre-arranged financing refers to financial mechanisms secured in advance of a crisis.

“Instruments such as contingent loans, contingent grants, and insurance activate automatically when specified triggers are met, ensuring rapid and predictable financial support,” the High-Level Panel explained.

Citing research by the Centre for Disaster Protection, the High-Level Panel noted that of the $76 billion spent on crisis finance in 2022, less than 2% was prearranged.

The group’s report added that of this already tiny proportion, only 1.4% reached low-income countries.

The High-Level Panel continued, “We cannot continue business as usual when reactive funding remains too slow, too costly, and leaves the world needlessly exposed. Pre-arranged finance must become the default for all predictable and modellable crises, not the exception.

“We see its power and potential to better protect communities, preserve livelihoods, and help shift leadership mindsets from reaction to readiness; resulting in more proactive approaches to managing risk.”

With this in mind, the High-Level Panel suggested that it is “unequivocal” that all forms of insurance play a central role in the aforementioned shift, emphasising that for the crisis protection transition to occur at scale, the supply and demand side obstacles to the uptake of insurance must be addressed.

“With projected crisis costs projected even conservatively in the trillions annually by 2050, capital markets hold relatively untapped potential for securing essential public assets like roads, hospitals, and power grids, and for transferring enormous financial risks away from public balance sheets,” the group’s report said.

The High-Level Panel stated that all countries must commit to public-private action and advance the partnerships needed to evolve insurance offerings, especially public asset insurance.

“Providers in the international re/insurance and capital markets should collectively and constructively promote greater uptake of and understanding of the sustainability impact of public asset insurance schemes,” the group added.

Co-Chair of the High-Level Panel Sir Mark Lowcock, commented, “In a world where risks can be modelled with ever greater precision, we should not wait to react until a crisis occurs.

“Nor can millions of people in vulnerable communities be left dependent on underfunded, ad hoc financial appeals where more effective financing instruments exist.”

Arunma Oteh, also Co-Chair of the High-Level Panel, said, “With human and economic costs already mounting, the world cannot afford to continue treating crises as unexpected surprises.

“This is not just about the quantity but also the quality of finance which is being provided. Reactive funding is too slow, too costly, and leaves the world needlessly exposed. Prearranged finance must become the default for all predictable and modellable crises, not the exception.”

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.