As climate-driven disasters continue to intensify globally, insurance-linked securities (ILS) are being positioned not only as a source of uncorrelated returns but as essential social infrastructure, according to Gareth Abley and Jehan Sukhla, Co-Heads of Alternatives at MLC Asset Management.
In a report authored by Abley and Sukhla, the pair note: “One of the reasons the industry is important – and we believe a social good – is the ‘insurance gap’. Globally, only about 40% of economic losses from natural disasters are insured, according to Swiss Re. That’s the insurance gap – the chasm between what’s lost and what’s covered.”
According to re/insurance broker Aon, total economic losses from natural disasters in 2024 reached US$368 billion, 14% above the 21st century average. However, as Abley and Sukhla highlight, only US$145 billion of this was covered by insurance, leaving an insurance gap of US$223 billion.
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