Focus on the ‘resilience gap’

The industry should talk about the ‘resilience gap’ rather than the protection gap, says UN Development Programme advisor Daniel Stander.

The insurance industry will never be able to entirely close the protection gap—and the same is true for the public sector. That’s why the United Nations Development Programme’s (UNDP) senior advisor Daniel Stander believes the “false bifurcation” between the two sectors must be eradicated.

“I don’t like the distinction between public capital and private capital, and I don’t like talking about the protection gap,” Stander told Monte Carlo Today.

He said the term protection gap is misleading since it implies that the gap between economic and insured losses for a given event could be closed simply with more insurance—which is not the case.

“We’re never going to close that gap with just insurance,” Stander said. “There’s no single entity that can address this by itself. It’s not just about paying a claim after an event.

“Economic development and fulfilling our human potential as individuals, as families, is driven by much more than simply whether we get a payout after a loss.”

Stander insists that the industry should instead talk about the “resilience gap” as it covers much more than simply insurance penetration.

“There is a protection gap—it hypothetically exists. But it’s time to think more broadly, more holistically about society and about behaviours—whether we have the capacity as a society to be resilient to various shocks and stresses over and above the financial resilience that may come from an insurance payout,” he said.

“It’s not just about paying a claim after an event.”
Daniel Stander, UNDP

“We need to think more holistically about resilience in the climate sense, about the mitigation of greenhouse gas emissions, and the adaptation of the built environment.”

Swiss Re’s analysis shows that the global insurance protection gap reached a new all-time high of $1.42 trillion in 2021.

Stander said: “The size of the challenge is very large and disproportionately shouldered by the most vulnerable—the least able to pay. But equally big is the opportunity for insurance to help foster that virtuous circle around penetration and economic outcomes towards fulfilling human potential.”

He believes that is possible only if the industry works closely with the governments, creating an enabling environment and making sure the regulatory framework is in place to support insurance.

“We at UNDP have a firm belief in the role of insurance and risk finance to tackle the interconnected development challenges that countries and individuals face when we think about delivering on the sustainable development goals,” he said.

“We need them as partners because they’re the ones who have the capital and the expertise to price and underwrite risk and design policies. It’s one set of capital. It’s one set of needs. And we must all work with it together,” he concluded.

Main image: Shutterstock / `Triff