The International Underwriting Association and Airmic are calling for a new approach to insurance and market engagement as organisations face widening protection gaps linked to emerging and complex risks.

In a joint report, Closing the Protection Gap, the two organisations argue that some risks cannot be fully insured because they are too uncertain to price, losses may be too large for commercial markets to absorb, or there is insufficient data to support product development.

Among the report's recommendations is a proposal to pilot outcome-based insurance policies for clearly defined scenarios such as datacentre failures and supply chain disruption, where multiple risk exposures may overlap. The report also calls for a review of the way policy exclusions are developed, and new methods of testing policy wordings against loss scenarios.

The report further recommends stronger engagement between underwriters, brokers and buyers, alongside greater investment in risk management education.

Tom Hughes, director of underwriting at the IUA, said: “There is consensus among underwriters and insurance buyers, particularly large organisations, that the protection gap is real, structural and growing. Both parties want a different conversation and getting that conversation right is the key to ensuring the long-term value of the insurance industry."

Diane Maxwell, CEO of Airmic, added: “The insurance industry is confronting a widening protection gap, as organisations face an unprecedented convergence of emerging risks. They are creating exposures which existing products, distribution channels and capital structures do not fully address. Better understanding of the client risk profile is in the commercial interest of the market, producing better pricing and better relationships.”

The report was published during Airmic's annual Conference and Exhibition, held in Birmingham this week.

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