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Protection Gap Analytics: The Role of Risk Modeling

This is the final blog in a series of four blogs examining three potential “protection gaps” and the importance of “protection gap analytics”. To read the first blog post in this series, click here.

We are not going to be able to take effective action to reduce any of these three protection gaps unless we can first learn how to consistently measure the difference between insured and total loss. Such measurement means we can know the current situation as well as set appropriate targets and monitor progress in reducing the gap. It can also help to focus investment and action.

At present, the only form of measurement is to acknowledge the difference between insured loss and the estimated total economic loss once the claims have settled, one or two years after a significant disaster.

In the same way that probabilistic catastrophe risk models were developed to enable insurers and reinsurers to look beyond the latest event loss, so the same models are now required to monitor the protection gap. This is the focus of “protection gap analytics”.

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