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Digital EditionThe Protection Gap Is Growing. Here’s How Insurers Can Close It
Pierre du Rostu has been CEO of the AXA Digital Commercial Platform since June 2022. He leads a team focused on providing new solutions for AXA's B2B clients. The aim is to help businesses navigate complex, interlocking risks using technology, moving beyond traditional insurance. Pierre began his career in consulting in 2011 and joined AXA in 2015, where he held senior roles in Commercial P&C. He later became Head of Integration at AXA XL, then Chief Operating Officer - International P&C, and Global Head of Innovation & Business Architecture.
The warning from the EU’s top insurance regulator Petra Hielkema that Europe ‘can’t cope’ with extreme weather costs, alongside similar concerns from global regulators at the Financial Stability Board, highlights a crisis that can no longer be ignored. Insurers are at a turning point. The increasing severity and frequency of disasters caused by climate change have pushed traditional risk models to their limits, creating a ‘protection gap’ – a substantial divide between what is insured and what needs to be insured.
That gap has been widening for some time. In 2024 and early 2025, it accelerated. Insurers have adjusted their coverage strategies in response to increasing risk, leading to significant changes in high-risk areas, such as places prone to wildfires and floods.
Yet, the problem is not limited to a handful of high-risk states or regions, or even a handful of risks. The risks the world now faces – climate change, economic instability, political crises, cyber crime, supply chain disruptions – are overlapping and amplifying each other, making traditional insurance models less and less effective and more and more costly. In this new reality, the industry has two choices: adapt to close the protection gap or stick to the old approach and be forced to retreat and leave entire regions uninsurable.
To close the gap, insurers must fundamentally rethink their role. They must evolve from passive risk compensators to active risk mitigators. And those who have already begun to make this journey must accelerate. The shift is financially necessary. The European Investment Bank estimates that for every €1 invested in prevention, €5 to €7 is saved in recovery costs. The economic argument is clear: investing in anticipatory risk management reduces overall losses, both human and financial.
This is compelling logic, and the solution to a problem that, if I can speak anecdotally, has been playing on the minds of insurers worldwide for some time. Yet most insurers still operate on the reactive model, hoping disasters won’t strike, then paying out claims when they do. This is no longer sustainable. The world’s climate does not behave as it once did. Hurricanes are intensifying. Floods are becoming more localized and erratic. Wildfires no longer obey seasonal patterns. The old way of assessing risk – using historical averages and broad statistical models – fails to capture the pinpoint precision of modern catastrophes.
One reason for the hesitation can be summed up by the cliché that it’s ‘easier said than done’. And that’s true – but it can be done. A key part of the solution is geospatial technology, which allows insurers to assess and manage risk in real time. By gathering raw satellite imagery and processing it with AI-powered geoanalytics, insurers can see exactly which properties, businesses, or assets are at risk. Instead of relying on outdated models, geospatial technology offers precise, up-to-the-minute insights, allowing both insurers and policyholders to take preventive action before disaster strikes.
The UN Office for Disaster Risk Reduction has shown that clearing vegetation and removing flammable materials significantly reduces the likelihood of homes catching fire. If geospatial technology is used to pinpoint specific areas of risk, insurers and their clients can clear brush, introduce fire-resistant materials, or even deploy private firefighting teams in high-risk zones.
Flood tracking can also enable action. Unlike hurricanes or earthquakes, floods can be hyper-localized, devastating one street while leaving the next untouched. Geospatial data enables insurers to map flood pathways in real time, helping homeowners and businesses prepare and fortify their properties before rising waters reach them.
Insurers are also using real-time satellite tracking to monitor ships carrying freight and other vital goods. If a vessel is heading toward a zone of political unrest, piracy, or extreme weather, insurers can warn businesses to reroute their cargo, potentially preventing millions in potential losses.
Some critics will argue that prevention-based insurance is too costly. The technology, they claim, is expensive to integrate and implement, and the data infrastructure required for it to function well is complex. But this perspective misses the larger point: the cost of doing nothing is far greater.
If insurers continue withdrawing from high-risk areas, the protection gap will become a chasm. Whole regions could fall into economic decline, businesses may struggle to secure financing, and governments will face increased pressure to provide public insurance, which is a costly and unsustainable alternative.
Insurers that embrace prevention, meanwhile, will have a competitive advantage. They’ll be able to offer lower premiums to businesses and homeowners who adopt risk-reducing measures, reducing overall claims costs while building stronger, more resilient communities.
But a shift in mentality is also key. Because the changes we’re discussing here could, to some, seem like a fundamental overhaul of what insurance is about.
I would argue instead that they represent a ‘completion’ of insurance, and a fulfilment of its original purpose: not just to provide financial recovery, but to increase resilience and protect human lives. In any event, it’s a necessary step that becomes more and more pressing by the day. Insurers can retreat, becoming smaller and smaller until they go out of business, or they can adapt, and play the vital societal role that they’ve always been trusted to play. &
