The underinsurance gap in Asian countries has widened by 9.4% to $134bn today from $122.5bn in 2012, according to new research from Lloyd's, the world's specialist insurance and reinsurance market, and the independent consultancy Centre for Economics and Business Research (CEBR).
The Lloyd’s Underinsurance Report 2018 says that globally, an estimated $163bn of assets are underinsured in the world today. In 2012, the first edition of the global report revealed $168bn in underinsured assets globally.
While the global gap has closed by almost 3% over the last six years, the world has at the same time seen a series of extreme weather-related catastrophes and new risks such as cyber attacks have emerged, posing additional threats to society.
Of the 43 countries studied, 18 were found to have insurance gaps, with nine of these countries located in Asia.
Several countries in Asia are singled out in the report as being among the most exposed to risks such as climate change and are countries least able to fund recovery efforts. These include Bangladesh, India, Vietnam, Philippines and Indonesia, each with an insurance penetration rate of less than 1%.
The country with the highest expected annual loss from natural disasters, Bangladesh, also has the largest insurance gap relative to GDP (2.1%). Expressed in absolute dollar values this equates to an insurance gap of almost $6bn in Bangladesh. The second highest is Indonesia at 1.4% of GDP, equivalent to an insurance gap of $15bn.
Lloyd’s Acting CEO Asia Pacific, Iain Ferguson, said, “It is concerning that while the global insurance gap is closing, in Asia, it is widening at a rapid rate owing to the increasing threat of natural disasters and the region’s economic growth.
“Developing countries are affected disproportionately by natural disasters and their losses are often compounded by poorly designed and constructed infrastructure, inadequate maintenance, a lack of insurance and delayed recovery. Insurance is a major contributor to disaster recovery, often providing the quickest financial crisis relief available. Insurance payouts frequently happen in days or weeks whereas humanitarian aid for reconstruction can take months to reach disaster zones.
“The insurance sector, in partnership with governments in the region, must act now to help tackle this crippling underinsurance crisis that threatens global prosperity. We need to work together to help people understand the insurance products that are available and to provide improved access to these products.”