Every April, there’s a temptation in Japan’s re/insurance market to look at the previous year’s loss numbers and draw conclusions from them. Last year was relatively quiet. Asia’s insured natural catastrophe losses came in at $5.2 billion — the lowest since 2017, and well below the 10-year average of $11.5 billion. On the surface, that looks reassuring. But it should not be.

Behind that number, 92% of the loss burden across Asia was uninsured. The hazards were real. The exposures grew. What changed was where the losses fell — and they fell mainly in markets where insurance barely reaches.

The protection gap isn’t someone else’s problem

Asia generated around 30% of global economic losses from natural catastrophes last year but accounted for only about 5% of global insured losses. Only 8% of the region’s economic losses were covered — far below the 10-year average of 17%.

I think about this from Japan’s perspective quite directly. Japanese companies have been expanding across Asia for decades. Their supply chains run through Thailand, Indonesia, Malaysia and Vietnam. When a major disaster strikes one of those markets and there is little insurance to fund recovery, the disruption doesn’t stay local. It travels — through logistics networks, through manufacturing dependencies, through the balance sheets of companies headquartered in Tokyo or Osaka. 

We have seen a version of this dynamic before. For example, the 2011 Thailand floods showed how difficult it was to assess overseas exposures, contributing to an unexpected multi-billion dollar loss from highly concentrated technology facilities. Under-insurance in emerging Asia is a Japan risk too.

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