Destructive US hurricanes have helped put this year’s Reinsurance Rendezvous spotlight on the global insurance protection gap and innovative opportunities to extend cover in traditional and new areas.

The annual Monte Carlo meeting of global insurance and reinsurance leaders also took place against a background of weak markets and abundant capacity.

As delegates gathered the centre of discussion was the impact of Hurricane Harvey, which  caused catastrophic flooding as it swept across the Texas coast late last month, while the gathering also coincided with the Florida Keys arrival of Hurricane Irma on September 10.

An Aon Benfield report was among several noting economic losses from Harvey would far exceed insured losses, with the low number of homeowners having flood cover just the latest example of the global protection gap.

“Uninsured populations exposed to natural disasters and severe weather events are growing, increasing the post-event refinancing burden for hard-pressed national governments,” the report says.

“At the same time, commercial insurers are adjusting to a world in which corporate buyers are just as worried about supply chains, intellectual property and reputation risk as they are about tangible assets.”

The challenge for reinsurers is to find opportunities within the underserved areas, particularly with plenty of capacity ready to be deployed and strong rebounds in property and catastrophe markets not expected any time soon.

Whether the hurricanes will have a significant impact on renewals remains to be seen. The Atlantic storm risk season continues until the end of November, and it will take a lot to lift a market weighed down by large levels of capacity, swollen by alternative capital.

“The pricing impact of any major loss is determined largely by its timing and the extent to which it was previously contemplated,” Aon Benfield says.

It believes an extraordinary loss event, or combination of events, would be needed for capacity to be materially impaired.

The Swiss Re Institute estimates the protection gap attributable to natural catastrophes and weather events was $US180 billion ($225 billion) globally last year, with insurance take-up curbed by a lack of awareness or trust, restricted access and affordability concerns.

“Innovative solutions help the industry make progress towards closing the ever-growing global protection gap,” Swiss Re CEO Christian Mumenthaler said.

“As we have seen again in the aftermath of recent floods in the US following Hurricane Harvey, as well as devastating flooding in Bangladesh, India and Nepal, the protection gap is very real and needs to be tackled with solutions that make insurance both more widely and more easily available.”

More generally, new technology is offering the potential for solutions beyond traditional reinsurance areas, with opportunities seen across multiple lines and all along the insurance chain.

Developing areas highlighted at Monte Carlo include cyber cover and progress on using blockchain technology to improve efficiency. A raft of other benefits could emerge through various insurtech projects that are attracting increasing interest.

Guy Carpenter says there is an opportunity for the industry to extend the cyber market by moving beyond data confidentiality and looking at operational technologies that increasingly carry cyber risks.

It says there must also be more work on identifying particular exposures, so reinsurers can better target specific areas.

Generally, technology advances and innovation are supporting moves to go beyond generic products, according to industry reports.

“As reinsurers seek to de-commoditise their offering we have seen an increase in product complexity and a willingness to offer innovative and customised solutions to help meet their clients’ goals and growth ambitions,” Guy Carpenter President International James Nash says.

JLT Re’s Viewpoint Report says the ability to extract commercial gains from innovations could become a key differentiator as companies compete for market share amid difficult economic conditions.

In the meantime, the prolonged market softening continued to prove challenging for revenue growth in the first half of this year.

The Willis Reinsurance Index shows net written premium grew 2% to $US129.8 billion ($162.4 billion), with companies seeking to diversify portfolios to lift underwriting performance amid pricing pressure.

The first half was also notable for a renewed surge of alternative capital, which affected mid-year reinsurance renewals and is now finding its way into the primary market, according to Aon.

“Sustained growth in reinsurance demand is dependent upon increasing the relevance of insurance to the global economy,” the group’s report says.

“Although alternative capital is not expected to have a material impact on the protection gap in the short-term, it potentially presents an opportunity to grow what is insurable and create new products that can address some of the underlying issues.”

Aon says there is every reason to believe reinsurance will have a growing role to play “as capital becomes better matched to risk”.