Uninsured losses of $32.94bn in India due to natural disasters in the last 5 years

Natural catastrophes in India resulted in uninsured economic losses totaling $32.94 billion (Rs 273,500 crore) during the five-year period from 2018 to 2022, highlighting the low insurance penetration in the country, as reported by global insurance giant Swiss Re. Insured economic losses during the same period amounted to just $1.10 billion (Rs 9,130 crore), indicating that 93 percent of exposures were uninsured.

Swiss Re highlighted India’s exposure to various natural catastrophes, including earthquakes, floods, tropical cyclones, droughts, and wildfires, alongside its expanding economy and growing insurance market. Despite this, insurance protection against such risks remains low, with their resilience analysis indicating that 93% of exposures are uninsured.

In 2014, uninsured economic losses reached a significant $15.18 billion (Rs 126,000 crore), the highest ever recorded, while insured losses were just $1.29 billion. Since 2014, total uninsured economic losses amounted to $74.83 billion (Rs 621,000 crore), whereas insured losses were only $5.41 billion (Rs 44,900 crore).

According to Swiss Re, economic losses due to natural disasters have been increasing steadily, driven primarily by economic growth and rapid urbanization. India’s major cities, with their high population and asset concentrations, are particularly vulnerable to multiple natural hazards.

Mahesh H Puttaiah, Head of Group Economic and Sigma Research at Swiss Re Institute, noted that India has made significant progress in risk mitigation measures for tropical cyclones, such as establishing early warning systems. However, there remains much to be done, particularly for other hazards like floods.

Swiss Re pointed out that a significant challenge in narrowing the substantial protection gap is the limited awareness and perception of risks. They also noted challenges in underwriting, emphasizing the need for more detailed data on existing natural catastrophe exposures and the establishment of more robust modeling capabilities.

At the individual and company level, the insurance industry offers solutions to help manage financial losses resulting from natural catastrophes. Meanwhile, at the state level, reinsurance solutions can aid governments in relief and rehabilitation efforts, reinstating crucial services, and rebuilding public infrastructure, as stated by Mahesh H Puttaiah, Head of Group Economic and Sigma Research at Swiss Re Institute.

Swiss Re has projected that total insurance premiums in India will experience a real growth rate of 7.1 percent over the next five years (2024-2028), surpassing global (2.4 percent), emerging market (5.1 percent), and advanced market (1.7 percent) growth rates. This forecast positions India’s insurance sector as the fastest-growing among G20 countries.

In 2023, premium growth in India slightly moderated from the previous year, reflecting ongoing adjustments to the post-COVID-19 era. Life premium growth slowed to an estimated 4.1 percent from 5.9 percent in 2022, attributed to diminishing risk awareness of the pandemic and recent changes in tax norms for high-ticket policies.

Swiss Re anticipates robust growth in the life insurance business, with premiums expected to increase by 6.7 percent in the period 2024-2028. This growth will be supported by rising demand for term life coverage among the middle class and the country’s young population, as well as increasing industry adoption of Insurtech solutions.

Regarding non-life insurance, premium growth moderated slightly from 9.0 percent in 2022 to an estimated 7.7 percent in 2023 as the market continued to stabilize post-pandemic. Factors such as high interest rates and elevated retail and medical inflation presented some headwinds to non-life sector growth.

Did You Know?