Lloyd's warns of £105bn uninsured global deficit

Lloyd’s has warned emerging countries face the threat of a £105bn global insurance deficit that will leave them exposed to the long-term costs of natural disasters.

Lloyd’s said the world may not be able to afford another unprecedented year of losses such as 2011 where the market suffered a £516m loss from the global natural catastrophes, including the earthquake and tsunami in Japan, the New Zealand earthquakes and the Thai floods, according to a report in The Guardian.

Despite Superstorm Sandy and the Costa Concordia disaster, 2012 has not produced significant losses for the insurance industry.

But research carried out by the Centre for Economic and Business Research on behalf of Lloyd’s has revealed that countries such as China, Poland, Colombia, Thailand, Mexico and Saudi Arabia were underinsured against natural disasters.

The study found that the cost of world catastrophes had grown by $870bn in real terms since 1980.

Lloyd’s chief executive Richard Ward said: “I’m not a meteorologist, but it does feel as though catastrophic events are becoming more extreme.”

Ward warned that businesses had to make risk management a board-level issue and governments needed to invest more in flood barriers and coastal defences, while insurers needed to do more research and price new risks in unfamiliar territories where underinsurance was an issue.

“Too many high-growth countries are failing to take the steps required to prepare properly for these sorts of events, leaving people and businesses exposed,” he said.

“As high-growth economies continue to develop and supply chains become increasingly interconnected, now is the time to ask ourselves: can the world afford to keep taking such a big risk?”

The research found that China accounted for the biggest part of the global shortfall, at almost $80bn last year.

It insured just 1.4% of natural catastrophe losses between 2004 and 2011, with $208bn in uninsured losses.