Risk modelling presents opportunity to plug protection gaps – Verisk

Better consideration of risk modelling results could present the reinsurance industry with an opportunity to plug protection gaps, as well as signpost suitable routes for diversifying portfolios, according to Giovanni Garcia, head of international business development at Verisk Extreme Event Solutions.

Speaking exclusively to Insurance Times at this September’s Rendez-Vous de Septembre 2025 conference in Monte Carlo, Garcia explained that risk modelling can clearly pinpoint “areas where insurance is not so prevalent”.

In turn, this could enable reinsurers to “spread their books or their capacity and capital into areas that they may not be in already [or] potentially pull out [of] certain areas that may be over exposed”.

Describing the scale of this opportunity in relation to the US, in particular, Garcia noted that “the protection gap is almost half” – this means that “for every $1bn (£740m) of loss, only half of it is insured, which is crazy when you think about the US being [one of] the most sophisticated [countries] in the world”.

He continued: “The California [wildfire] events that happened this year [in January], they were only protected by about 60% or 70%. So, by people using [risk] models appropriately, they can not only ensure they have the right cover, they can look at how they can spread their capacity and capital into other areas and potentially also pull out [of] certain areas that may be over exposed.”

Giving another example, Garcia cited the Asian home and motor market, where there is “only around 12% coverage”.

He added: “It is really for us to provide as much information as we can, to make instruments and products available. But then, it’s for the [(re)insurance] markets to figure out how they can [improve cover penetration].”

Supporting public-private partnerships

Although re/insurers can use risk model metrics to “start to build products”, Garcia noted that this data can also be used to underpin public-private partnerships – such as the UK’s government-backed reinsurance scheme Flood Re, which aims to make flood insurance more accessible and affordable.

“There may be [a] certain limit coming from the local government and then there may be top ups that could be built,” Garcia said. “There are pools all around the world that are built using the models that we provide.”