Howden shines the spotlight on the role of insurance in sustainable growth

The insurability crisis 

 “One immediate consequence [is] the widening of the insurance protection gap - the difference between insured and uninsured losses.”

• In Europe, flood insurance is becoming harder to obtain. 
• In California, 80% of wildfire-affected homes were underinsured or not insured at all. ³
• Around the world, regulatory hurdles and price pressures are driving insurers out of high-risk markets. 

At the same time, we continue to build on UK floodplains, in the fire-prone hills of California, and along vulnerable coastlines in Miami. We’re exposing more people and assets to risk while reducing our ability to insure them. 

“Keep this up” Barnaby said, “and in the coming years, we’ll be plunged headlong into an insurability crisis, because we are living in a new age of instability. 

Norms we once took for granted have been turned on their head.  The rules-based order is being challenged. Old alliances are being shaken to their core, and extreme weather events are increasingly common, which means in the next quarter of a century, we’re going to need more insurance not less. After all, without insurance you simply can't manage these risks. And what’s uninsurable, becomes uninvestable.” 

That’s why we’re at a crossroads.  We either: 

1. Fail to insure communities, shifting an unaffordable burden onto individuals. 
2. Rely on governments to step in, straining public finances beyond their limits. 

Neither option is sustainable. Instead, Barnaby called for a redefinition of the insurance’s role in society. 

A transformational tool for the future 

“Insurance needs to step into the spotlight.” Too often, it’s seen as a monthly direct debit—just another bill to pay. But insurance is a transformational tool, “able to use its mastery of catastrophe modelling and risk management to tackle tomorrow’s intractable problems.” 

“We often read headlines about what insurance fails to deliver, but far less about what it achieves every day,” continued Barnaby 

Take the recent California wildfires. Insurers are currently paying out billions to help affected communities rebuild. But beyond payouts, consider Humanity Insured, a charity incubated by Howden and backed by the insurance market. 

Launched last year, it is using parametric insurance to make insurance accessible to those on the climate frontline. With satellite technology, it’s now possible to predict when a climate disaster will occur and trigger an automatic payout to those affected by the disaster. 

 For example: 

• Small-hold Kenyan farmers, who rely on loans to buy seeds and fertiliser, now receive automatic payouts when droughts or floods strike, preventing defaults on debt and ensuring they’ve money to feed their families and keep their children in school. 
• Communities in East Africa receive pre-emptive insurance payments when extreme rainfall threatens floods, allowing them to move to safety, vaccinate livestock, and protect their livelihoods. 

In just three months, Humanity Insured has mobilised over $50 million in insurance capacity to help over one million people, with plans to protect 3 million more. 

“And this is just a taste of what insurance is capable of. After all, insurance is the foundation stone of finance and governance. You can’t get credit and you can’t release capital without it. But if we could harness insurance’s power, as a great convener, a mighty conduit- if you’ll pardon the pun- through which government, the financial industry and the private sector can unite, then we would have a powerful weapon to manage some of the giant risks we face in tomorrow’s world. 

This isn’t a theory, It’s already happening” added Barnaby. 

Five key risks we must tackle 

Looking ahead, Barnaby outlined five key risk areas where this insurance approach is needed: 

1. Flood risk 

• The past two years were amongst the wettest on record.  
• The UK now has 6.3 million properties at risk of flooding, set to rise to 8 million by 2050.⁴ 
• New flood management projects such as (Re)Flood launched by The Conduit and partners, are exploring ways to restore natural floodplains, protect towns, and provide better insurance access to those who allow their land to flood. 

2. Food security 

• Certain climate-related agricultural losses are set to double in key regions over the next 25 years.
• In Europe, only 25% of agricultural losses are insured ⁵ - in developing economies, it’s even lower.
•  In Africa, countries have joined up to create a mutual insurance company – African Risk Capacity - to share risk and access international markets. This is just one of the many insurance innovations that have been pioneered over the last decade outside of our developed economies. “It’s an excellent example of technology transfer from emerging economies to developed ones, and an illustration of how we need to share both risk and expertise globally,” said Barnaby. 

3. Energy risk 

• Insurance can unlock finance for creative start-ups producing renewable innovations, which often face the same barriers to success – tech failure, credit risk, supply chain disruption 
• Howden has worked with Aviva to create a “construction and operation cover” policy for the solar energy conscription service SunSave, whose aim is to make solar energy accessible to all UK households. 

4. Global security 

• Howden brokered insurance for a vessel chartered by the United Nations to alleviate food shortages for hundreds of millions of people in the Middle East and Africa who relied on Ukrainian grain. 
•  And Howden created a first-of-its-kind cargo war facility to protect vessels from drone and missile strikes by Yemeni-based militia groups in the Red Sea. 

5. Cyber threats 

•  Last year's global outage caused major disruption and an estimated insured loss of $1bn, the biggest cyber loss ever ⁶
•  More than half of UK businesses – well over a million private sector companies - have suffered at least one cyber strike in the past five years, yet many lack cyber insurance. ⁷
• Products like Cyber+ are making coverage easier and more accessible. 

The future of insurance  

In a world of growing instability, insurance must innovate to stay relevant. It must be recognised not as an afterthought, but as a critical enabler of economic resilience. 

Barnaby concluded:  “My industry must continue to innovate, seeking to remain relevant, and stop the drift towards obsolescence.  And although I have provided examples of what we are doing at Howden, I know that there are a lot of people in our industry, quite a few of whom are here today, who are also looking at how they can play their part.  Collectively, we know that the insurance industry can and should play a role in confronting these challenges ahead. 

"And just imagine. If we can take on the giant risks of today, from food to flood, from energy and security to cyber, and beat them, what an incredible legacy we would pass on to the next generation.” 

[1]  ABI, UK Insurance and Long-Term Savings The state of the market, link

[2] BBC, link

[3] The Conversation, link

[4] The Guardian, link

[5] VOX EU CEPR, link

[6] Howden, link

[7] gov.uk, link