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Moody’s warns re/insurers alone cannot close natural catastrophe protection gap
Moody’s says more than half of natural catastrophe losses are uninsured in 2025, with US earthquake exposure leaving about 84% uncovered.
Moody’s says the natural catastrophe protection gap cannot be closed by property and casualty insurers and reinsurers alone, pointing to a situation where damages from events keep rising while coverage lags. In a new report, the ratings agency estimates that more than 50% of these losses are uninsured in 2025.
The report finds that the share of catastrophe losses going uninsured has remained high since 2015, with 57.8% of catastrophe losses left without insurance coverage over that period. It also argues that closing the gap requires a mix of approaches that combine risk awareness, stronger disaster resilience for property and infrastructure, and scaling up risk transfer solutions.
Moody’s highlights that the largest protection gaps appear in rare but high-impact perils, including earthquakes, where roughly 84% of US earthquake exposure is uninsured due to low take-up. It also cites a protection gap of 83% for flood perils and 27% for wildfires, noting that wildfire coverage is more commonly purchased and mortgage lenders often require it.
The report attributes some of the limits to insurers themselves, saying re/insurers must charge sufficient premium to pay claims, operate within regulatory capital requirements, and generate returns. It adds that correlated tail risk and customer affordability, or the absence of coverage requirements, can leave certain risks uninsured, even when reinsurance is used to support capital.