Simon Glairy stands as a pivotal figure in the evolution of risk management, merging deep insurance expertise with the cutting-edge potential of AI-driven assessment. As the global climate landscape shifts, his ability to translate complex data into actionable strategies has made him a vital voice for an industry facing unprecedented financial exposure. This conversation explores the widening chasm between economic losses and insurance coverage, the specific challenges of modeling “slow-onset” environmental perils, and the divergent strategies used by European nations to protect their citizens. We dive into the massive financial projections facing the mid-2040s, the stark reality of uninsured heatwaves, and the regulatory pressure pushing the industry toward a new era of transparency and innovation.
With physical risk losses projected to reach a staggering $41.4 trillion by the mid-2040s, how is this massive protection gap reshaping the way the industry views its role in global economic stability?
The figure of $41.4 trillion is more than just a statistic; it represents a looming shadow over the global economy that we can no longer ignore. When we see such a massive share of losses falling outside existing insurance policies, the burden shifts directly onto the shoulders of governments, small businesses, and individual households. This isn’t just a financial shortfall; it is a structural weight that can effectively stall the economic recovery of entire regions for years after a disaster. We are seeing a world where natural disasters are growing more frequent as temperatures climb and sea levels rise, and the industry is realizing that our current ability to close the gap is being outpaced by the sheer velocity of climate change. The “protection gap” is becoming a primary metric for resilience, forcing us to move beyond simple policy issuance to a model where we must actively participate in regional economic survival.
The data reveals that slow-onset perils like heatwaves and water stress are largely uninsured, with 95% of losses from the 2025 European heatwave remaining uncovered. Why are these specific hazards so difficult for traditional insurance models to capture?
Traditional insurance was built on the foundation of discrete, sudden events—the “bang” of a hurricane or the “snap” of an earthquake—which makes the slow-burning nature of heat and water stress incredibly difficult to pin down. These perils build over time, creating a stifling pressure on agriculture and public health that doesn’t fit neatly into a standard policy structure designed for a single date of loss. Because they are so hard to model and even harder to price accurately, the industry has historically left them on the sidelines, leading to that gut-wrenching 95% uninsured rate we saw during the recent European heatwave. We are dealing with product design limits where the underlying economic exposure is clear, but the pricing frameworks simply haven’t kept pace. To solve this, we have to rethink how we define a “loss event” when the damage is done through weeks of unrelenting temperature rather than a single afternoon of wind.
When we look at the stark contrast in flood coverage, specifically Germany’s 40% protection gap versus France’s sub-20% gap, what does this tell us about the effectiveness of public-private partnerships?
The comparison between Germany and France is a masterclass in how different regulatory architectures determine the safety net for citizens. In Germany, even with a steady rise in demand for flood insurance since the early 2000s, there remains a persistent 40% gap for inland flood risk that leaves a significant portion of the population vulnerable. France, however, utilizes the Caisse Centrale de Réassurance (CCR), a state-run reinsurer that provides unlimited-peril backing, which effectively keeps the protection gap below 20% across every single hazard category. This demonstrates that while private markets are essential, they often struggle to close the shortfall on their own when faced with systemic risks like flooding. The French model proves that a coordinated public-private structure can provide a level of security that a purely market-driven approach has yet to achieve in high-risk zones.
Given that natural disasters caused $260 billion in economic losses in 2025, with over half remaining uninsured, what are the immediate consequences for the reinsurance market as we look toward 2026?
The numbers from 2025 are a sobering reminder of the “new normal,” where $260 billion in losses creates a massive ripple effect throughout the global financial system. As we look toward 2026, Swiss Re has already warned that insured losses alone could hit $148 billion if they return to long-term normal levels, which puts immense pressure on carriers to quantify their physical climate risk. We are seeing a significant push from regulators and rating agencies for more disclosure, essentially demanding that insurers show their work on how they plan to survive these escalating totals. For reinsurers, the data is a call to action to identify exposure concentrations, especially in regions where the gap fell to a record low of 38% in 2025 but the catastrophe totals remained among the highest in history. The industry is currently in a high-stakes race to build credible products for an underserved market before the next $200-billion-plus year arrives.
What is your forecast for the global insurance protection gap over the next decade?
My forecast is that we will see a paradoxical period where the protection gap fluctuates significantly as we struggle to bring slow-onset perils into the fold. While 2025 saw the gap fall to its lowest record of 38%, the sheer scale of the projected $41.4 trillion in physical risk losses suggests that this “improvement” may be temporary unless we revolutionize our product design. I expect that heat and water stress coverage will move from an experimental, early-stage niche to a mandatory component of regional risk portfolios by the early 2030s. We will likely see more nations adopting structures similar to the French CCR model as the cost of uninsured disasters becomes a primary threat to national sovereign credit ratings. Ultimately, the industry’s survival will depend on our ability to price the “unpriceable” and turn those massive uninsured losses into a sustainable, data-driven market.
