PPP role debated to close protection gaps
Public-private partnerships (PPPs) were a key topic at the Singapore International Reinsurance Conference, where industry leaders debated their role in closing protection gaps. Thierry Léger, group CEO of SCOR, argued that government bailouts for uninsured losses often signal a failure of the insurance sector.
Nick Donovan, director of market development at Lloyd’s, agreed. He highlighted both a protection gap and a “perception gap,” where people assume the state will cover losses. “Clarity on what losses the state will and what it won’t bear, and who is responsible for what, is essential,” Donovan stated.
Donovan warned that some sovereign states in Europe are struggling to afford such bailouts. He urged Asia to learn from their experience. He also noted cases where state involvement has worked well. After Hurricane Melissa, Jamaica received a full $150 million payout from a World Bank-backed catastrophe insurance policy, triggered by pre-agreed parameters. This was backed by a catastrophe bond issued in 2024 by the World Bank (International Bank for Reconstruction and Development).
Another example is the U.S. National Flood Insurance Programme, managed by FEMA. Victor Kuk, CEO of Peak Re, pointed to Thailand’s new government-funded disaster insurance. Launched on October 1, it covers an estimated 30 million homes against flooding, windstorms, and earthquakes.
However, Donovan said insurance can sometimes seem expensive because it serves as a “signalling effect” for significant risks. He questioned why homes continue to be built in high-risk areas like flood plains. “Societies benefit from those risks being transferred to the insurance market, if customers and businesses can bear the market price,” he added.
Léger had previously noted that some risks have become uninsurable and require a different approach, likely based on loss prevention. The industry must better explain its value to close persistent gaps.
Edward Ler, chief underwriting officer at ERGO Group, emphasized the need to improve accessibility and awareness. He pointed to large underinsurance in small and medium-sized enterprises (SMEs), which employ a significant portion of the workforce. “We need to explain the risk better. We have to explain what we do better as an industry,” Ler said.
