Asia's Insurance Gap: A $64 Billion Climate Risk to Global Supply Chains

As climate change intensifies, Asia-Pacific faces a dual crisis: escalating natural disasters and a critical lack of financial protection. New data reveals a dangerous insurance gap that leaves economies and millions exposed.

According to the latest report from reinsurance giant Munich Re, total economic losses from natural disasters across Asia-Pacific reached $73 billion in 2024. However, only $9 billion of those losses were covered by insurance, leaving a staggering $64 billion shortfall. This contrasts sharply with North America, where 70% of that region's $133 billion in disaster losses were recouped through insurance.

"The protection gap isn't just a regional issue; it's a systemic risk to global trade," warns Janice Chen, Munich Re's Head of Property Treaty Underwriting for Southeast Asia. "Southeast Asia is an essential hub in global supply chains. Inadequate insurance increases the risk of economic shocks cascading across borders, affecting everything from electronics to agriculture."

The region's vulnerability was starkly illustrated in March 2024 by a 7.7-magnitude earthquake in central Myanmar. The disaster caused $12 billion in losses—making it the year's second-costliest event globally—but only $1.5 billion was insured. It also claimed 4,500 lives, marking it as 2024's deadliest catastrophe.

In many lower-income Asian nations, including Myanmar, Laos, Cambodia, and the Philippines, insurance penetration against natural disasters can be less than 5%. Experts point to a complex web of barriers.

"A fundamental challenge is the lack of reliable, granular climate data," explains Benedikt Signer, Executive Director of the Singapore-based SEADRIF Insurance Company, a regional catastrophe risk facility developed with the World Bank. "In data-scarce environments, international insurers struggle to accurately model and price risks. This creates a vicious cycle of underinvestment and underinsurance."

Government perceptions also play a role. Signer notes that public officials sometimes view insurance premiums as an intangible expense. "From a public procurement perspective, you expect a tangible good or service in return. Insurance only provides a payout if a disaster strikes, which can make it a hard sell for budget-conscious governments."

The economic stakes are immense. Southeast Asia produces 30% of the world's rice and over 80% of its palm oil. Climate disasters—from typhoons to extreme heat—directly impact farmers through reduced yields and crop failure, while damaging critical infrastructure and disrupting logistics networks.

For vulnerable populations, the consequences are severe. "Without insurance or savings, a single disaster can erase decades of progress," Signer emphasizes. "Families are forced to pull children from school, sell assets, or plunge into debt just to survive, creating long-term consumption losses that far exceed the immediate physical damage."

Innovative models like SEADRIF's parametric insurance offer a potential path forward. By triggering pre-determined payouts when specific weather thresholds (e.g., rainfall levels, wind speed) are met, it bypasses lengthy damage assessments. This allowed SEADRIF to deliver $1.5 million to Laos within 24 hours of devastating floods in August 2023.

Beyond insurance, analysts stress the need for a multi-pronged approach: building physical defenses like seawalls, strengthening early-warning systems, and deepening partnerships with multilateral development banks to fund resilience.

Voices from the Ground

David Lim, Risk Manager in Singapore: "The numbers are alarming but not surprising. We've built immense economic value in climate-exposed zones without proportional financial safeguards. This is a call for both public and private sectors to innovate—blended finance and parametric products must scale rapidly."

Maria Santos, Smallholder Farmer in the Philippines: "After the last typhoon, we lost everything. No insurance, no help for months. We replant with debt. It feels like we are just waiting for the next storm. Where is the protection for people like us?"

Professor Arjun Mehta, Climate Economist at Bangkok University: "This gap reflects a deeper failure in risk governance. Governments prioritize visible infrastructure over financial resilience. But in an era of climate change, fiscal preparedness is as critical as physical defenses. The ADB and World Bank must make insurance integration a condition for more climate financing."

James Kellerman, Supply Chain Analyst in Hong Kong: "Frankly, it's negligent. Global corporations profit from Southeast Asia's manufacturing and agriculture but turn a blind eye to the foundational risks. If a major disaster hits a key export zone, the 'just-in-time' global supply chain will become a 'just-too-late' wake-up call. The cost of inaction will be borne by consumers worldwide."

This analysis is based on original reporting from Fortune.com and current data from Munich Re.