As disaster risks grow faster than societies can adapt and protection gaps widen, well-designed public-private insurance programs (PPIPs) combined with national disaster resilience strategies can enhance risk reduction, a recent report by the Geneva Association notes.
The report highlights that natural and man-made disasters are becoming more frequent, more costly and more difficult to deal with. These risks are outpacing society’s ability to adapt, widening protection gaps, and testing the limits of re/insurance markets.
Against this backdrop, policymakers and industry leaders face the question of how society can maintain affordable, reliable protection as disaster risks increase.
The Geneva association outlines the role PPIP can play in addressing these protection gaps.
PPIP shares risks and costs between public and private stakeholders (households, businesses, re/insurers, governments, and potentially capital markets) to make insurance more accessible, more affordable, and increase insurance penetration in ways that the public and private sectors alone cannot achieve.
The report notes that many PPIPs have succeeded in restoring or increasing coverage where the private market could not. However, they often act as passive shock absorbers rather than as part of a wider strategy to reduce risk.
Historically, these programs were established reactively, usually following a major disaster. Persistent protection gaps are now prompting many jurisdictions to actively explore PPIP, rather than waiting for a crisis to erupt before taking action.
The Geneva association emphasizes that maximizing protection over time requires a shift from financing disasters to proactively managing risks. Governments must prioritize risk-reducing investments, strengthen private insurance markets, and strategically deploy PPIP where private capacity is lacking.
Analysis shows that many PPIPs are under severe pressure due to rising losses. While risk sharing among individuals, businesses, reinsurers and governments is critical, for some hazards and regions this is no longer enough. For PPIPs to be sustainable, they must form part of a comprehensive national risk reduction strategy, rather than replace it.
In its conclusion, the Geneva Association said: “This shift requires a new agreement between governments, reinsurers/insurers and society. Governments must take the lead in reducing risks, investing in resilient infrastructure and enforcing risk-informed planning and regulations that incentivize individuals and businesses to mitigate their own risks. Insurers must advance risk analysis and pricing that reflects real risks, while rewarding prevention. PPIPs remain important tools, but they should be (re)designed as an integral part of this wider strategy – one that complements and incentivizes risk reduction rather than subsidizing risk.”
The report highlights that, if properly designed and aligned with national disaster resilience strategies, PPIPs can do more than share post-disaster losses: they can also strengthen incentives to reduce risks, protect public finances, and support faster, more equitable recovery.
Jad Ariss, managing director of the Geneva Association, said: “Public and private insurance schemes cannot just be passive shock absorbers that pay out after disasters. To remain viable in a world of escalating risks, they must become engines of resilience – strengthening prevention, strengthening incentives to reduce risks and helping societies recover faster with less pressure on public budgets.”
Hélène Schernberg, Director of Public Policy and Regulation at the Geneva Association, added: “The design of the PPIP is complex and costly for governments. Policymakers therefore need a structured decision-making process: to demonstrate protection gaps, exhaust risk reduction measures and strengthen private insurance markets, define the risk exposures that require intervention, and make a clear fiscal case for the residual risk that the country is willing to absorb.”
