From safety net to resilience-builder: how the insurance industry is stepping up

• An insurance protection gap persists in both the Global North and South, endangering global resilience
• Strengthening insurability means investing in disaster risk reduction upstream
• Insurance industry has a major role to play both in broader resilience-planning and mobilising capital

In a world increasingly shaped by interconnected and compounding risks – from climate change and cyberthreats to geopolitical instability – there is a renewed imperative to strengthen international and multistakeholder cooperation to build resilient societies and economies.

Escalating climate risks, shifting economic conditions and underinvestment in risk reduction are challenging the affordability and availability of insurance coverage – particularly in the areas where it’s most needed. This evolving landscape is raising important questions about how to maintain insurability, close protection gaps and unlock investment for more adaptive, risk-aware societies.

In 2024 alone, extreme weather events caused $320 billion in damages – yet less than half of those losses were insured. The crisis is twofold: a persistent protection gap in the Global South, and a retreat of insurance coverage in the Global North. As affordability and availability shrink, so too does society’s collective ability to manage risk.

This is not just a challenge for insurers – it is a systemic threat to global resilience, development and inclusive growth. If left unaddressed, it will destabilise markets, deepen inequality and derail progress toward climate and development goals.

So what needs to change?

That question animated discussions at the Insurance Development Forum’s (IDF) recent 10th anniversary convening; where industry leaders, policy-makers and development institutions came together not to celebrate, but to confront the stakes and chart a new path forward. What emerged was a compelling call to redefine the future role of insurance in a rapidly changing world, centred on three urgent priorities:

1. Strengthening and preserving insurability in a warming world

As mentioned above, extreme weather events caused $320 billion in economic losses in 2024 – yet only $140 billion was insured. This stark gap reflects both the lack of affordable coverage in low- and middle-income countries and the accelerating withdrawal of insurance from high-risk areas in advanced economies, where insurers cite mounting losses, regulatory uncertainty and rising exposure.

As coverage becomes more expensive or unavailable, households and businesses are forced to go uninsured – shrinking the risk pool and driving up premiums for those who remain. This vicious cycle undermines mortgage access, deters investment in vulnerable regions, accelerates climate-driven migration and threatens long-term economic stability.

At the root of this crisis is persistent underinvestment in disaster risk reduction (DRR) – the proactive steps taken to reduce exposure before disaster strikes, including prevention, mitigation and preparedness. The economic case is clear: The US Department of Commerce estimates that every $1 invested in pre-disaster resilience yields $13 in long-term economic benefits. Yet despite this return, 88% of global disaster financing still goes toward post-disaster response. In addition, one in three developing countries spends more on post-disaster response than on education or health, meaning that funds for critical development are consistently redirected to disaster response.

Public-private partnerships will be essential to reverse this trend – creating the policies, incentives and investment pathways needed to reduce risk and accelerate climate adaptation. For example, the IBHS Fortified Standards, developed in collaboration with insurers, policy-makers and the real estate sector, empower homeowners and communities to build more resilient structures. Proven effective in enhancing flood resilience across the south-eastern United States, these standards are now being applied to homes rebuilt after the Palisades wildfire in California – ensuring that reconstruction reduces future fire risk and keeps insurance more accessible.

The IDF Summit made clear that preserving insurability in a warming world will require far greater integration of DRR into climate policy, financial decision-making and infrastructure investment. Insurers, governments, supervisors and international financial institutions must work together to align risk reduction with risk transfer –building a more resilient global system that protects communities, maintains market stability and ensures long-term affordability of coverage.

2. Redefining insurance as a strategic partner in resilience

Insurance has long been viewed as a backstop, paying claims after disaster strikes. But the industry’s potential goes far beyond that. With unparalleled access to climate risk data, modelling capabilities and long-term capital, insurers can play a catalytic role in transforming how societies prepare for and respond to shocks.

Across the world, we’re seeing examples of this play out. From insuring mangroves and coral reefs that buffer coastlines, to developing parametric products for drought-affected farmers, to expanding inclusive insurance for informal workers and small businesses, insurers are beginning to act not just as claim-payers, but as co-designers of resilience.

At the systems level, insurance also shapes behaviour through pricing, risk assessments and investment decisions. That influence must now be harnessed more deliberately. By embedding risk intelligence into infrastructure planning, supply chains and financial systems, insurers can help steer markets and governments toward more adaptive, climate-smart decisions.

3. Mobilising resilient infrastructure investment at scale

A key theme emerging from the discussions was the vital role of the insurance sector in unlocking capital for climate-resilient infrastructure – particularly in emerging and developing economies that face acute climate risks yet lack sufficient resources to adapt.

To help bridge this gap, the Insurance Development Forum (IDF) launched the Infrastructure Resilience Development Fund, a new initiative backed by key insurance and asset management partners across the IDF’s membership base. The fund aims to align insurance industry capital with high-impact infrastructure projects across sectors such as clean energy, water systems and climate-resilient transport.

By contributing capital, risk analytics and technical expertise, insurers are helping to de-risk investments and crowd in private capital through blended finance and risk-sharing mechanisms. The initiative is already moving from concept to implementation and offers a replicable model for scaling resilient infrastructure investment, particularly in the markets where the need is greatest. It highlights the industry’s expanding role not only as a risk manager, but also as a catalyst for sustainable development at a time when infrastructure systems are under growing pressure from climate shocks.

This momentum also reflects shifting expectations among consumers and clients – both corporate and individual – who are increasingly demanding solutions that align with resilience and sustainability goals. The presence of over 30 senior government officials, including from ministries of finance, underscored the growing recognition of the insurance industry’s capabilities to inform national planning and guide difficult but necessary investment decisions amid rising uncertainty and systemic shocks.

Proactively enabling resilience

As the world enters a new era of compounding risks, the role of the insurance industry must evolve: from serving as a passive safety net to becoming a proactive enabler of resilience. By mobilising capital, leveraging data and fostering innovation, the sector can help societies better anticipate, absorb and adapt to the growing impacts of climate change and other systemic shocks.

This imperative is gaining political momentum, as evidenced by recent G20 discussions on the widening protection gap – underscoring the urgency for solutions that are both scalable and inclusive. Encouragingly, the IDF Summit showcased concrete progress and a growing ecosystem of collaboration. From new financing models to risk-sharing mechanisms, there is clear evidence that the industry is beginning to step into a more catalytic role.