BARCELONA, Oct 22 (Thomson Reuters Foundation): Disaster-prone developing nations, including Bangladesh and Indonesia, are exposed to crippling losses when storms, floods or earthquakes strike because they suffer from a dangerous lack of insurance, industry experts said on Monday.
Globally, assets worth about $163 billion are not insured against catastrophes, posing a "significant threat" to livelihoods and prosperity, London-based insurance market Lloyd's said in a report.
The value of "underinsured" assets has shrunk by only 3 per cent since 2012, it noted.
Many countries with the lowest levels of insurance are also among those most exposed to risks, including from climate change impacts, and are least able to fund disaster recovery efforts, it added.
"If insurance is not available, catastrophes can have a much greater impact on economies and lives," Lloyd's Chairman Bruce Carnegie-Brown said in a statement.
Emerging and low-income economies account for almost all of the global "insurance gap", the report said.
Insurance penetration rates - total insurance premiums as a percentage of gross domestic product - are on average twice as high in rich nations as those in developing countries, it noted.
Bangladesh, India, Vietnam, the Philippines, Indonesia, Egypt and Nigeria all have an insurance penetration rate of less than 1 per cent, it said.
After a disaster, uninsured losses usually have to be paid from government funds - a problem for poorer countries that cannot afford to rebuild.
"Catastrophes coupled with underinsurance can be seen as one of the significant factors that holds back economic development and perpetuates global inequality," the report said.
Some risks in richer nations also are not well-covered by insurance, it noted, including earthquakes in Italy and floods in the United States.
Slow progress on expanding the use of insurance to protect against risks is "concerning", the report said - and remains the case despite many economies bouncing back from recession in the six years since the "insurance gap" was last measured.
It is particularly worrying given the upsurge in "more severe, frequent and costly natural disasters, driven in large part by climate change", the report added.
Another report also released on Monday by Lloyd's and the UK-funded Centre for Global Disaster Protection outlined four innovative financial instruments that could generate cash to invest in resilient infrastructure and boost insurance coverage.
They include loans that incorporate insurance to keep interest payments low, and bonds whose payments are linked to the success of resilience measures.
Another idea is "resilience service companies" that would retrofit buildings to better withstand natural hazards, for example, reducing risks and lowering insurance premiums.
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