Governments worldwide should increase financial support alongside insurers amid rising pressure from major loss events, according to a report from the Organisation for Economic Co-operation and Development.

The paper spotlights natural hazards, infectious disease outbreaks and cyberattacks as key loss vectors, and says responses should be evaluated based on severity and frequency, plus the adequacy of current insurance options.

The OECD calls for increased investment in public-private insurance programs for risks that “occur more frequently and where the certainty of an insurance obligation is important for mitigating hindrances to economic activity.  

“The insurance sector could help with speedier payments, fraud reduction and in encouraging risk management and risk reduction... [it] also has greater appetite and capacity to assume natural hazard and cyber risks and has contributed to risk reduction for both risks.”  

The report says only 32% of flood losses in OECD countries between 2000 and 2024 were covered by insurers.  

In Australia, about 48% were covered, and the report highlights the Australian Reinsurance Pool Corporation’s role covering cyclone-related flood risks.

It suggests similar programs may be needed to address affordability challenges linked to bushfires.

The report also details the role of public measures targeting risks that are less likely to materialise and have reduced insurer appetite, such as pandemics.  

“A public compensation and financial assistance arrangement should provide the government with greater discretion to respond to any unforeseen needs or circumstances resulting from a large event,” the report says.  

“That discretion could be leveraged to ensure a targeted response, focusing on the most severely affected, most vulnerable and/or those whose protection is deemed to be important for economic or social functioning.”  

See the report here.