(Photo by Emidio JOZINE / AFP via Getty Images)

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Every time a flood wipes out a town in Mozambique, a drought devastates smallholders in the Sahel, or a wildfire tears through communities in southern Europe, the question that follows is always the same: who pays? Increasingly, the answer is: nobody. Because increasingly, nobody was insured.

The insurance protection gap, the difference between total economic losses from natural disasters and the portion that is actually covered, is widening. Plus as climate change accelerates the frequency and severity of extreme weather events, this gap is becoming one of the most significant and underappreciated risks to global financial stability.

As much as this is a problem for the world's most vulnerable countries, insurability hits G7 economies too. In the UK, the Climate Change Committee’s fourth independent Climate Risk Assessment identified access to insurance as one of the eight key areas for government action. When risks go uninsured, governments become the insurer of last resort: absorbing costs that were never budgeted for, in fiscal environments that can ill afford them. The macroeconomic consequences ripple outward.

How to fix the system

Last month, as part of the Think7 process advising the French G7 Presidency, our task force published a solutions paper on enhancing insurability against natural disasters. The paper makes the case that closing the protection gap is achievable through deliberate, coordinated action across three fronts.

The first is fairer burden-sharing between public and private actors. Right now, rules governing who pays when disaster strikes are too often opaque, inequitable, and poorly designed to incentivise prevention. Public backstops exist in many countries, but without clear rules about what insurers must contribute in return, they can inadvertently weaken market discipline rather than strengthen it. The G7 should work with the OECD and the International Association of Insurance Supervisors to build a stronger, more coherent framework, which makes disaster coverage genuinely affordable for families and businesses over the long term, while ensuring insurers pull their weight.

Public-private partnerships, meanwhile, have real potential. Schemes like Flood Re in the UK and Japan's disaster risk reduction platform show what is possible when public and private actors align properly. The challenge is replicating and scaling those models, including in developing country contexts where fiscal constraints make the task harder but the need is even greater.

The Developing World Cannot Be Left Behind

This brings me to the second front: insurability in emerging and developing economies. Here, the gap is most acute and the consequences most severe. Many of the countries most exposed to climate risk are also the least able to absorb losses. Yet they remain largely locked out of the sophisticated risk transfer tools, such as catastrophe bonds, or parametric insurance, that could help them manage those risks.

Parametric insurance in particular holds genuine promise. Unlike traditional insurance, which pays out based on assessed losses after the fact, parametric products trigger payouts automatically when predefined conditions are met. For example, a river reaches a certain height, wind speeds exceed a threshold. That speed matters enormously when a country needs liquidity to respond to a crisis. But parametric tools only work if the underlying indices are transparent, verifiable, and trusted. Right now, standards are fragmented and inconsistent. The G7 should task international supervisors with developing the common standards and safeguards needed to unlock their potential at scale.

Equally important is the ability to pay out rapidly when disaster strikes. Pre-arranged financing mechanisms, e.g. climate-resilient debt clauses and debt-for-nature swaps, can free up fiscal space and keep countries solvent in the aftermath of a catastrophe. The deployment of these tools need to scale rapidly.

The Old Adage is True: You Cannot Manage What You Cannot Measure

The third front is perhaps the least glamorous, but in many ways the most foundational: shared data and risk intelligence. Right now, the information needed to understand, price, and manage natural catastrophe risk is fragmented across dozens of different platforms, methodologies, and institutions. Finance ministries and central banks often lack the tools to do so in a consistent, comparable way.

The G7 has an opportunity to change that. A shared, open-access database of natural catastrophe risk indicators, obviously built to be interoperable with IMF and FSB frameworks, would be a genuinely transformative public good. So would an open-source platform making hazard exposure data accessible to sophisticated institutional actors, as well as to frontline workers, exposed industries, and the communities themselves.

A G7 Moment

The French G7 Presidency offers a real opportunity to move from diagnosis to action. The recommendations in our paper are specific, implementable, and grounded in what we know already works. They do not require reinventing the wheel, rather they require the political will to connect the existing spokes.

The insurance protection gap is widening because we have collectively allowed the system to drift. The good news is that the system can be redesigned. The tools exist. The knowledge exists. What is needed now is coordination, commitment, and the recognition that in a world of accelerating climate risk, the cost of inaction dwarfs the cost of getting this right.

The G7 should seize this moment. The alternative, a world in which more and more risk goes uninsured, in which governments absorb shocks they cannot afford, and in which the most vulnerable countries are left entirely exposed, is one none of us can afford either.