The Protection Gap and Private Capital: Can Claims Management Keep Pace?
The protection gap—the disparity between economic losses from catastrophes and the portion of those losses that are insured—is no longer just a headline. By the end of 2024, the insurance-linked securities (ILS) market had surged to a record US$107 billion in capacity, reflecting strong private capital entering the risk financing space. For claims administrators, these dynamics are reshaping not only risk sharing, but the demands on claims speed, transparency, and cost discipline. Edge Claims sees the shifting capital flows as both a mandate and an opportunity.
Global studies underscore that protection gaps are poised to worsen. According to Bain & Co., across property and casualty lines, gaps will grow through 2030 as insurers confront escalating catastrophe costs and affordability pressures. (Bain) Meanwhile, data from the SAS / Economist Impact survey puts the global protection gap at about US$1.8 trillion in premium equivalent terms; 78% of surveyed insurance executives believe the industry has an ethical obligation to close this gap. (InsurTech Digital) Such findings ripple directly into claims management: when more economic loss is uninsured, more responsibility falls on adjusters and administrators to validate, settle, and communicate losses in high-stress conditions.
In the ILS market, the expansion is more than capital moving—it is proof that sponsors, insurers, and investors are seeking alternative ways to crowd in risk capacity amid rising catastrophe exposure. Throughout 2024, ILS capacity grew markedly, buoyed by cat bond issuance, strong investor returns, and interest from new sponsors. For Edge Claims, that means adapting workflows: we must be ready to support indemnity and parametric triggers, coordinate more closely with underwriting partners, and prepare for claims complexity inherent in hybrid instruments.
Claims management implications are profound. Practices around claims intake, documentation, field assessments, and settlement timelines are under pressure to evolve. Areas historically regarded as “fringe risk” or “secondary perils” are suddenly material; small, dispersed losses from frequent storms or flood events now aggregate into significant loss burdens. Efficiency, cost control, and supply-chain readiness (for repairs, rebuilds, logistics) become differentiators—not just among insurers, but among administrators. Edge Claims is building capacity to forecast clustered loss events, scale investigative resources, and deploy technology that streamlines validation of coverage gaps during tense claim moments.
Moreover, clarity and communication are more critical than ever. Policyholders increasingly expect upfront disclosure of what is and is not covered, timeliness in settlement, and transparency when losses exceed predictable models. Claims delays, ambiguous coverage or documentation requirements, and inconsistency in valuation are the kinds of friction that multiply once protection gaps widen. Edge Claims is investing in process transparency tools, claim tracking dashboards, and proactive outreach protocols to reduce uncertainty for clients and reduce dispute risk.
Private capital and ILS innovations are reshaping the financial contours of catastrophe risk. But innovation cannot outpace capability: claims administrators must match the rising expectations in metrics—settlement speed, accuracy, transparency—and maintain cost discipline in a world where losses are jumping both in number and in magnitude. Edge Claims is aligning its strategy accordingly: enhancing climate-adjusted triage models, refining resource deployment for frequent, low-severity losses, and optimizing supply-chain partnerships for repair and recovery. In doing so, we believe claims management firms that anticipate, adapt, and execute with precision will play a pivotal role in narrowing the protection gap—not as bystanders, but as essential agents of resilience.