A substantial share of catastrophe losses remains uninsured in advanced economies, with wildfire and flood losses increasing and putting pressure on the capacity of private insurance markets, according to the Organisation for Economic Co-operation and Development (OECD). In a new report on financial protection against catastrophic risks, the organisation concludes that insurance penetration for natural hazards, cyber incidents, and pandemic-related business interruption is often limited, and sets out a framework for governments to assess financial resilience and potential interventions.
According to the report, 24 of 38 OECD member countries have insured less than half of their natural hazard losses since 2000, leaving households, businesses, and governments exposed to sizeable post-event costs. The OECD estimates that average annual economic losses from wildfires in member states rose by 360% in 2015-2024 compared with 2000-2014, while floods generated average annual economic losses of US$32 billion between 2020 and 2024.
The organisation notes that many individuals, households, and firms face exposure to losses from natural hazards, cyberattacks, and infectious disease outbreaks that could amount to a large share of income or revenue and exceed their capacity to absorb. “Natural hazards, cyberattacks, and infectious disease outbreaks can lead to devastating financial consequences that many individuals, households, or businesses would struggle to absorb. Insurance can provide a critical source of funding to absorb losses and support recovery. However, evolving weather and environmental risks, fast-moving technological changes, and other factors are testing the ability of private insurance markets to achieve broad financial protection against these risks,” the OECD said.
The report finds that insurance cover for natural hazards is generally available in member countries, but take-up remains limited in many markets and is often affected by affordability and availability issues in high-risk zones. Cyber insurance is available for most incident types, though exclusions are common for large, correlated cyber events. Revenue losses from large-scale infectious disease outbreaks similar to COVID-19 remain largely outside standard commercial insurance products.
In response to rising wildfire losses and resulting pressure on property insurance availability and pricing, some jurisdictions have expanded residual market arrangements and public‑private programmes for property cover. In certain markets, these arrangements include premium discounts or other mechanisms linked to risk‑reduction measures by policyholders. For flood risk, the OECD reports that only 32% of economic losses in member countries between 2000 and 2024 were insured. This has coincided with a trend in which more governments introduce or adjust public‑private flood insurance schemes, citing concerns about exposure to uninsured losses and budgetary impacts, as well as objectives related to planning and adaptation policies.
The OECD indicates that government-supported insurance mechanisms are often considered for higher-frequency perils where predictable financial protection is sought and where private (re)insurers can participate in risk-bearing and risk management. Over time, the report notes that risk-based pricing, in combination with mitigation and adaptation efforts, could influence both the supply and pricing of cover, particularly in high‑exposure locations.
The OECD analysis aligns with a separate publication from the ASEAN Secretariat, “Disaster Risk Financing and Insurance in Southeast Asia: Trends, Challenges, and Strategic Approaches,” which reviews disaster risk financing and insurance (DRFI) across ASEAN member states. That regional study describes variation in policy development, implementation capacity, and insurance market participation in disaster risk transfer.
Indonesia and the Philippines are cited as countries that have moved toward layered financial protection strategies. Indonesia has established a national pooling fund, arranged reinsurance for public assets, and launched subsidy initiatives for crop and livestock insurance. The Philippines has accessed capital markets using catastrophe bonds and deployed parametric insurance to support disaster relief financing. Other member states, including Brunei and Cambodia, are concentrating on building institutional capacity for disaster management. Cambodia’s planning efforts are affected by fiscal and technical constraints, while Brunei, despite having formal disaster management structures, has not yet implemented dedicated DRFI programmes.
Across most ASEAN markets, overall insurance penetration remains below 10%. The ASEAN report links this to factors such as income levels, financial literacy, and distribution capacity. Even in relatively higher-income economies like Brunei, insurance uptake is described as modest. Social protection systems show wide variation. Thailand and Singapore have more extensive non‑health safety nets, while Myanmar and Cambodia report coverage levels below 10%, leaving a large share of the population financially exposed after disasters where insurance or public transfers are limited.
Agricultural and aquaculture insurance schemes in Indonesia, Vietnam, and the Philippines are under pressure from high loss ratios. In Indonesia, livestock insurance has recorded loss ratios above 100%, and some aquaculture programmes were suspended during the COVID‑19 pandemic because of budget reallocations and claims experience. The ASEAN report attributes these developments in part to structural issues such as adverse selection and limited participation from lower‑risk farmers, which weaken risk pooling and increase average costs.
A separate climate risk analysis by WTW on the 2024 South Asian monsoon season characterises the resulting floods as an example of systemic underinsurance in the region. Heavy rainfall led to crop damage, infrastructure disruption, and energy supply issues across India, Nepal, Bangladesh, and Pakistan. Bangladesh estimated agricultural losses of around US$380 million, primarily in rice production. In Nepal, landslides cut road access to Kathmandu, while Pakistan reported damage to hundreds of kilometres of roads and numerous bridges. Hydropower generation was reduced in some areas as facilities in flooded zones were temporarily shut down.
WTW estimated that more than 80% of economic losses from the event were uninsured, illustrating the scale of catastrophe protection gaps in South Asia and the extent to which recovery costs are borne by public finances, external assistance, and household resources. Against a backdrop of growing climate- and disaster-related losses, the region’s insurance sector is operating under closer scrutiny regarding its capacity, product design, and capital structures, as markets consider how to manage accumulation risk, support solvency, and address unmet demand for risk transfer in both retail and commercial segments.
