The growing global toll from natural disasters and climate-related losses has become a major concern. In 2024, global disaster losses were estimated at over $350 million. As the world faces increasing risks, governments in developing countries must balance protecting their people and economies today while investing in future resilience.
Development often increases risks, as more infrastructure and assets are exposed to hazards. With billions being invested in infrastructure projects in developing countries, it’s crucial to account for risks and build with resilience in mind. Yet, satellite data shows that cities are growing faster in flood zones than in safe areas, underscoring the need for more disaster risk management.
Despite efforts to prevent disasters, residual risks remain, requiring effective emergency management, contingency planning, and disaster risk finance (DRFI) solutions. Unfortunately, in developing countries, the insurance protection gap is significant—more than 90% of disaster losses are not covered by insurance. This leaves many countries without the financial safety net needed for recovery. Public-Private Insurance Programs (PPIPs) offer a promising solution to this gap.
The Role of Public-Private Insurance Programs (PPIPs)
Closing the protection gap in emerging markets requires a two-pronged approach: expanding PPIPs and strengthening domestic insurance markets. PPIPs are designed to adapt to the evolving needs of countries, depending on government priorities, financial capacity, and the maturity of the local insurance market.
In low-income countries with emerging or no insurance markets, governments often provide social insurance through social protection programs. These programs are not always supported by market-based financing tools but could be enhanced with insurance solutions.
For example, in Malawi, the national safety net includes a contingency fund for droughts, and a sovereign risk transfer tool was used to cover larger-scale droughts. During the 2023–24 drought, the program delivered $11.9 million in emergency support, helping over 140,000 households with timely cash assistance. This marked the first time an insurance product directly supported a social protection program in Africa, setting a precedent for other nations.
In countries with more developed insurance markets, governments can tap into domestic insurers to create programs that protect citizens, businesses, or public assets. In Indonesia, the government transferred the risk of nearly 11,000 public buildings to insurers, backed by international reinsurance. This program helps ensure that critical infrastructure is repaired quickly after disasters, minimizing service disruptions and reducing fiscal pressure.
Case Studies of Successful PPIPs
PPIPs can take different forms depending on the country’s needs and resources. For instance, Morocco has implemented a dual system. It mandates catastrophe risk coverage for all property and casualty insurance policies, while a public solidarity fund (the Solidarity Fund against Catastrophic Events, or FSEC) protects uninsured households. After the 2023 Al-Haouz earthquake, FSEC unlocked $300 million to cover eligible losses, with $275 million coming from parametric reinsurance.
There is no one-size-fits-all solution for PPIPs in emerging economies. However, successful programs generally require collaboration across multiple sectors and stakeholders, including governments, private insurers, donors, and civil society.
How Governments and Partners Can Foster Successful PPIPs
For PPIPs to succeed, governments must integrate them into national DRFI strategies, strengthen legal frameworks, and promote risk management across sectors. Donors and development partners should support governments with technical assistance, capacity building, and seed funding. Private insurers and reinsurers need to develop inclusive products and share risk data, while civil society should advocate for transparent, resilient financing.
By providing people and businesses with financial tools to manage risk, PPIPs can help build a more resilient economy and encourage private investment. The current protection gap poses a significant barrier to economic growth, job creation, and climate adaptation. Closing this gap through PPIPs presents a unique opportunity for accelerating development and fostering resilience in the face of growing disaster risks.
The Path Forward
The role of PPIPs in helping countries protect lives, assets, and economies is clear. Even in countries with emerging insurance markets, these programs can provide essential financial protection and help build a foundation for long-term resilience.
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