The insurance protection gap globally rose to a record $US1.24 trillion ($1.7 trillion) last year and is set to worsen further because of the pandemic, Swiss Re says in a new Sigma report.

Natural disaster resilience, one of three major risks included in the calculation of the protection gap, fared the worst with a score of 24.1% last year.

Health and mortality resilience, the other two risks used to calculate uninsured exposures, scored 93.4% and 43.6% respectively.

Swiss Re says the overall Composite Insurance Resilience Index fell to 53.7% last year from 54% in 2018, meaning about $US1.2 trillion of assets are exposed to potential natural disaster, health and mortality risks.

“Insurance resilience against three major risks weakened in 2019,” Swiss Re said. “Natural catastrophe resilience was lowest of the three risk areas.”

As had been flagged previously, Swiss Re believes climate change will further strain natural disaster resilience in the form of more severe and frequent “secondary perils” such as flood.

“Flood risk is typically less insured,” Swiss Re said. “We expect rising losses from floods and other secondary peril events in both the near and longer-terms.”

According to Swiss Re, the natural disaster protection gap increased to $US227 billion ($311 billion) last year from $US222 billion ($304 billion) in 2018 and $US155 billion ($213 billion) in 2008.

The Sigma report, which also looked at the pandemic’s fallout on the global economy, predicts “a profound shift in economic resilience” with the US, Japan and the UK emerging weaker in the post-COVID environment.

While the massive stimulus packages have cushioned the global economy from going into a meltdown, they have come at the expense of resilience.

“The reality of wartime-like spending is that it leaves much less room for future policy manoeuvre,” Swiss Re Group Chief Economist Jerome Jean Haegeli said.

“What's more, the key economic policy risk is that these temporary government measures are too challenging to unwind and [so] become permanent, leaving economies dependent on ongoing stimulus.

“A focus on replenishing resilience by reinstating fiscal and monetary buffers, through structural reforms to improve long-term growth prospects, will be critical.”