Insurance and catastrophe
Insurance is how much of the real economy's catastrophe risk is shared, and reinsurance is how insurers share it in turn. When catastrophe losses rise, the effects travel: claims and reinsurance costs increase, cover is repriced or withdrawn, and the uninsured share returns to households, firms, lenders and governments. The Global Risks Alliance (GRA) examines protection gaps, insurance loss and reinsurance dependencies as shared industry questions. It never underwrites, places or prices cover. See Financial-system risk.
- 01In briefThe short answer
- 02TransmissionHow catastrophe risk moves through insurance
- 03Supervisory frameCapital, accounting and climate in insurance
- 04MethodThe exceedance curve, and where it comes from
- 05QuestionsShared questions GRA works on
- 06BoundaryMarket questions stay with the market
- 07ConnectedThe same subject across the Consortium
GRA · Institution · service level R0
The short answer.
Insurance and catastrophe risk is how the real economy's catastrophe losses are shared through insurance and, in turn, reinsurance, and what happens when losses rise: claims and reinsurance costs increase, cover is repriced or withdrawn, and the uninsured share returns to households, firms, lenders and governments. GRA examines protection gaps and reinsurance dependence.
Exposure, hazard and the exceedance curve.
Which places drive loss in a severe year, and how far it reaches into reinsurance. Illustrative design values.
How catastrophe risk moves through insurance.
| Channel | How the shock reaches finance |
|---|---|
| Catastrophe claims | Large events produce concentrated losses across many policies at once |
| Reinsurance dependency | Insurers rely on a concentrated reinsurance market, whose capacity and cost move after major events |
| Withdrawal of cover | Rising losses lead to repricing or exit, enlarging protection gaps |
| Credit spillover | Uninsured damage reaches mortgage, business and infrastructure lending |
| Fiscal spillover | Governments absorb uninsured public and private losses |
Channels describe mechanisms, not measured strengths or probabilities.
Capital, accounting and climate in insurance.
| Instrument | Status, October 2026 | What it asks of catastrophe risk |
|---|---|---|
| Insurance Capital Standard | Adopted by the IAIS December 2024 for internationally active insurance groups; baseline implementation self-assessment in 2026 | A group prescribed capital requirement including natural catastrophe risk |
| IAIS Application Paper on climate-related risks | Published April 2025, replacing the 2021 paper | Governance, ORSA scenario analysis, valuation, disclosure and conduct applied to climate risk |
| Solvency II, as amended by the 2025 review | Amendments apply from 30 January 2027 | The one-in-two-hundred year standard, with climate scenario analysis added to the ORSA under the review |
| IFRS 17 Insurance Contracts | Effective since 1 January 2023 | How catastrophe-exposed contracts are measured, including the risk adjustment |
The exceedance curve, and where it comes from.
Catastrophe risk is read from an exceedance probability curve: the probability that annual loss exceeds each amount. It is built from four modules: a stochastic event set, a hazard footprint per event, a vulnerability function per building class and a financial module that applies deductibles, limits and reinsurance. The 1-in-200 point on the curve drives Solvency II capital; the 1-in-100 and 1-in-250 points frame reinsurance purchases.
Each module has a different owner and a different uncertainty. Hazard science sits at GCRI flood and storm; open modelling frameworks such as Oasis make the modules inspectable. Specialist work continues at Reinsurance and Catastrophe.
Shared questions GRA works on.
- 01
Protection-gap evidence
What is uninsured, why, and how reliable are the estimates?
- 02
Model differences
How should differences between catastrophe models be shown, rather than averaged away?
- 03
Accumulation
Where can one event, or a compound sequence, drive correlated losses across insurers?
- 04
Insurance and credit links
What happens to lending when cover for collateral is withdrawn?
Market questions stay with the market.
- GRA never sets, suggests or discusses premiums, rates, capacity or coverage terms.
- It does not sell, solicit, negotiate, place or broker cover, and recommends no insurer or reinsurer.
- No collective commitment on which risks, regions or clients to insure is discussed or agreed.
- Readiness work: Insurance readiness and Protection gaps.
The same subject across the Consortium.
Insurance and reinsurance
Insurance Nexus, established, and Reinsurance and Catastrophe, in development.
Hazards and disaster resilience
Evidence from The Global Centre for Risk and Innovation (GCRI): Disaster Resilience.
Disaster and crisis governance
Dialogue convened by The Global Risks Forum (GRF): Disaster and Crisis Governance.
Terms used on this page.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Catastrophe model | Software that combines hazard, exposure and vulnerability modules to simulate many possible events and estimate the distribution of insured loss. |
| Reinsurance | Insurance bought by insurers to transfer part of their risk to another carrier, limiting the effect of large or accumulated losses on their capital. |
| Insurance protection gap | The difference between economic losses and insured losses, for an event, a year or an expected annual figure. |
| Probable maximum loss | The loss a portfolio could suffer at a stated return period or exceedance probability, used to size reinsurance and capital. |
Where this page's references lead.
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
- IAIS Insurance Core Principles and ComFrame, including the Insurance Capital Standard (adopted December 2024)
- IAIS Application Paper on the supervision of climate-related risks in the insurance sector (April 2025)
- Solvency II Directive 2009/138/EC as amended by the 2025 review (apply from 30 January 2027)
- IFRS 17 Insurance Contracts
- Oasis Loss Modelling Framework (open-source catastrophe modelling)
- NOAA IBTrACS tropical cyclone best-track archive
Questions and answers.
Does GRA publish protection-gap estimates?
Can insurers coordinate on capacity through GRA?
Is GRA an insurance intermediary?
Why does reinsurance dependency matter beyond insurers?
Around GRA.
Start with an enquiry.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.