Swiss Re Sigma: Protection gap laid bare as Asian cat losses hit $65bn

Natural catastrophes in Asia generated around $65bn of economic losses in 2025, yet only a small fraction was absorbed by re/insurance markets, according to the latest Sigma study from the Swiss Re Institute.

The reinsurer’s regional analysis states that “92% of the loss burden was uninsured, pointing to large protection gaps, especially in lower-income markets constrained by affordability, access and weaker insurance frameworks.”

Insured losses totalled roughly $5bn for Asia Pacific, leaving a protection gap that remains one of the widest globally.

Swiss Re notes that “rising losses are being driven mainly by exposure growth, including rapid urbanisation, infrastructure expansion, and the concentration of assets in flood-prone and coastal areas”.

Swiss Re adds: “Earthquakes, floods and tropical cyclones were the main drivers of insured losses, with the report stating they “have accounted for more than 90% of Asia’s annual insured losses on average.”

Floods dominate economic losses

Flooding was the single largest contributor to economic damage in Asia, accounting for more than half of total losses in 2025.

The global sigma report highlights “a very late-season, compound monsoon flood with tropical-cyclone influence across Thailand, Indonesia and Malaysia,” with economic damage of at least $11bn.

It adds that “the storms acted both sequentially and simultaneously to saturate the soil, overwhelm flood defences and create widespread flooding, landslides and storm surge.”

The reinsurer’s Asia analysis reinforces the structural drivers behind these losses, stating that “rapid urbanisation alongside inadequate drainage and embankments… turned last year’s heavy rains into floods and landslides.”

Cyclone Ditwah added further losses, including more than $4bn in Sri Lanka, with the report noting it became “the country’s costliest natural catastrophe on record.”

Urbanisation factor

Swiss Re highlights that “the build-up and implementation of adaptation measures has not kept pace with the evolution of exposure growth,” increasing the likelihood that future events will generate outsized losses.

Earthquake risk exposes the protection gap, Swiss Re emphasises. Seismic activity played a major role in 2025 economic losses.

The Asia focused portion of the report states that a magnitude 7.7 earthquake in Myanmar “resulted in estimated economic losses of $11bn… but with very limited coverage, insurance claims were limited to just above $200m.”

This stark gap illustrates the scale of underinsurance across the region.

The report adds that “associated loss outcomes demonstrate how site conditions and exposure, not just proximity to the epicenter, drive outcomes.”

In Thailand, for example, losses were amplified because “Bangkok sits on a basin of soft sediment that acts like an amplifier, increasing the intensity and duration of shaking.”

Structural drivers of rising losses

Swiss Re’s global report makes clear that the underlying trend is not cyclical but structural.

It states that “the upward trend in insured losses is structural as exposure keeps building,” even in years where headline losses appear moderate.

The Asia analysis echoes this, noting that “many Asian economies are expanding rapidly, often faster than efforts to reduce vulnerability to severe weather and other natural hazards.”

Flood risk in particular is accelerating, Swiss Re’s Sigma report warns.

Swiss Re finds that “flood-related insured losses in the region are rising about twice as fast as in the rest of the world,” driven by urbanisation and concentration of assets.

At the same time, adaptation remains uneven.

The report warns that “progress is not yet sufficient or universal, underscoring the need for stronger resilience and broader insurance coverage.”

Protection gap challenge

Despite Asia accounting for around 30% of global economic catastrophe losses in 2025, it represented only about 5% of insured losses.

Swiss Re highlights the imbalance clearly: “Asia’s large share of global economic losses but much smaller share of insured losses flags a still-sizeable protection gap.”

This gulf is particularly pronounced in emerging markets, where “lower incomes, limited market reach, weak risk-awareness and less mature insurance frameworks continue to constrain insurance penetration.”

For the re/insurance industry, the message is direct.

“Insurance coverage is not keeping pace, pointing to a widening protection gap,” the report adds.

And with exposure continuing to build, the challenge is becoming more urgent, according to the reinsurer.

As Swiss Re makes clear, losses in Asia are not only rising, they are increasingly concentrated, structurally driven and still largely uninsured.