Hurricane Harvey in the US and monsoon flooding in India have highlighted the significant gap in cover for natural hazard losses, Munich Re says.

The total impact from the events is not yet known, but there is clearly a large difference between the economic losses and the amount covered by insurance, with the gap considerable even in highly developed markets, according to the reinsurer.

“Weaker economies in particular keep suffering natural catastrophes and other major loss events that set back their economic development for years,” board member responsible for reinsurance Torsten Jeworrek said at the Reinsurance Rendezvous in Monte Carlo.

“Governments and private industry need to work together to find solutions to reduce risk and strengthen the basis for prosperity in these countries.”

Broker Guy Carpenter has called for increased transparency in catastrophe risk models used by the insurance industry, planners and government, and business entities affected by natural perils.

“The challenge with the ‘black box’ model is people don’t understand the input and output, which are key decision-making variables for insurers and reinsurers,” President and CEO Peter Hearn said.

He says an open-source environment where different systems can share data would benefit the public and private sector.

“When more information is known about catastrophes, more capital will be made available to cover perils, which can lead to a reduction in the coverage gap between insured and economic losses,” he said.

In a Monte Carlo commentary series on industry issues, Guy Carpenter says insurer efficiency measures and a focus on capital optimisation are making insurance industry companies appealing to investors.

“Current valuations are still favourable for investors,” Head of Business Intelligence Richard Hewitt said. “Dividend growth and capital management actions can continue to drive the sector forward, rather than the returns and growth that might have done so in the past.”

Guy Carpenter says challenging market conditions are fuelling growth and merger and acquisition activity in the managing general agent sector.