As the severity and frequency of natural catastrophe events continue to grow, addressing the protection gap remains an important focus, which has led Moody’s to call out that scaling the capital markets and tapping into the insurance-linked securities market can help narrow the gap as it continues to grow.
In a recent article published by Moody’s, the firm outlines that property and casualty (P&C) insurers and reinsurers cannot close the protection gap on their own, stating that they must charge enough premium to pay claims, stay within regulatory capital requirements, whilst also generating returns for shareholders.
These constraints ultimately limit how much catastrophe risk they can safely insure. At the same time, customers’ inability to afford coverage or the absence of coverage requirements also means that certain risks end up going uninsured.
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