Natural hazards, cyber attacks and infectious disease outbreaks can lead to devastating financial consequences that many individuals, households or businesses would struggle to absorb. Insurance can provide a critical source of funding to absorb losses and support recovery. However, evolving weather and environmental risks, fast-moving technological changes and other factors are testing the ability of private insurance markets to achieve broad financial protection against these risks.

This report aims to help governments strengthen financial resilience against catastrophic risks. It provides a framework to assess the need for government-supported financial protection and the advantages and disadvantages of the main approaches to offering such support. It applies this framework to three types of large-scale risks, natural hazards, infectious disease outbreaks and cyber-attacks and incidents. 

The report examines the implications of increasing wildfire losses and government approaches to supporting the availability, affordability and take-up of insurance coverage for this risk. Finally, it examines how the different design features of flood risk insurance programmes contribute to four common objectives for a public-private insurance programme.

Key findings

• Governments should evaluate the need for government-supported financial protection to respond to large-scale catastrophes.
• Public-private insurance programmes are likely to be a better approach to responding to more frequent risks and to unprotected financial exposures that could impede economic activity.
• Public-private insurance programmes that leverage insurance market capacity and risk reduction expertise may be better placed to address unprotected financial exposure to natural hazard and cyber risks.
• Addressing increasing wildfire losses requires increasing investment in wildfire risk reduction to maintain the availability of insurance coverage.
• Public-private insurance programmes that provide coverage for flood risk can support broad coverage, reduce overall public sector exposure and support risk reduction.