New Zealand is the second-most exposed nation to natural catastrophe losses, according to Lloyd’s in-depth underinsurance study of 43 economies.

Expected natural disaster losses cost New Zealand about 0.66% of its GDP, second only to Bangladesh on 0.83%.

It has a higher risk exposure than Japan and other less developed Asia-Pacific economies in the top 10 list, which measures a country’s vulnerability to losses as a proportion of economic activity.

Chile was third (0.65%), China ranked fourth (0.49%), followed by Vietnam (0.48%), Indonesia (0.43%) and Thailand (0.42%).

Turkey was eighth (0.38%), the Philippines placed ninth (0.34%) and Japan came in next at 0.29% to round out the list.

The Insurance Council of New Zealand (ICNZ) says the Lloyd’s findings underscore the importance of insurance in a country that is often prone to earthquakes and major floods.

“This report shows how risky New Zealand really is,” CEO Tim Grafton said.

“As a risky country, it’s important that we remain well-insured. That means not only ensuring we insure our assets but making sure coverage of those assets is sufficient to replace them.”

The study also shows New Zealand has a relatively strong level of insurance coverage.

Australia has the sixth-highest coverage rate of 3.5%, up four spots from the last study. The Netherlands leads the world on 7.7%, followed by South Korea (5%) and the US (4.3%).

Mr Grafton says although New Zealand has relatively high insurance penetration rates, “that doesn’t mean all our assets are adequately insured”.

“It’s possible that people are under-estimating the cost to replace their assets, which could leave them vulnerable should another major disaster strike.

“We recommend everyone checks their current cover to ensure it’s fit for purpose and will give you what you need in the event of a total loss.”

New Zealand has the fourth-best insurance penetration rate (total premiums as a percentage of GDP) of 4.2%, but the country’s ranking has slipped since the last study in 2012 when it placed second with 5.2%. Only the Netherlands was better on 9.5%.

Lloyd’s says the decline in coverage levels was due to a drop in uptake of insurance products in recent years.

Efforts to close the underinsurance gap are making limited progress, Lloyd’s says.

About $US163 billion ($230 billion) of assets globally remain uninsured, which is just a 3% improvement from the last study, and Asia-Pacific economies account for $US134 billion ($189 billion) of the insurance gap.

China has the biggest exposure at $US76 billion ($107 billion).

Developing economies are most vulnerable because they are more exposed to climate change risk and insurance take-up still trails that of developed markets where penetration rates are often twice as high.

“Insurance is a major contributor to disaster recovery often providing the quickest financial crisis relief available,” Lloyd’s Chairman Bruce Carnegie-Brown said.

“The insurance sector wants to work with government to help people understand the insurance products that are available and to provide improved access to those products.

“Together we can help tackle the crippling underinsurance crisis and give people in the world’s most exposed economies the security they so desperately need.”

The Lloyd’s study was conducted with the UK’s Centre for Economics and Business Research.

Click here to read the full report.