Only $US116 billion ($110.87 billion) of the $US370 billion ($353.65 billion) in global economic losses last year were covered, according to the Lloyd’s Global Underinsurance Report.

It says catastrophe underinsurance is placing huge burdens on taxpayers.

The report, which examines data from 42 countries since 2004, shows 17 of the most underinsured nations recorded a disaster cover gap totalling $US168 billion ($160.58 billion).

Growth economies such as China, Mexico, Brazil, Chile and Turkey are among the underinsured.

Even Japan’s cover was found wanting. When last year’s earthquake and tsunami caused damage worth $US210 billion ($200.73 billion), only $US35 billion ($33.45 billion) was covered by insurance. Taxpayers picked up the balance.

“The earthquake in Japan, the most costly natural catastrophe of all time, revealed that earthquake insurance penetration is low [in the country], despite being highly exposed to this risk,” Swiss Re Chief Economist Kurt Karl said in a statement accompanying the report.

“It also showed that both developing and advanced economies can be underinsured.”

The situation is far worse in the developing world, with China insuring just 1.4% of catastrophe losses from 2004 to last year, suffering $US208 billion ($198.82 billion) in uninsured losses.

For five of the 17 most underinsured countries, the average uninsured loss for major catastrophes is more than 80%.

In China the average uninsured catastrophe cost is $US18.91 billion ($18.07 billion), while in India it is $US1.96 billion ($1.87 billion). Indonesia’s average is $US1.45 billion ($1.38 billion).

Even in some better-insured countries, less than half of economic loss from catastrophes is covered.

In Australia 50% of catastrophe losses were insured over the survey period, with New Zealand below 40%.

Australia is in the top tier of insured countries, with cover equivalent to 1.4% of GDP, compared with 2.6% for South Korea, 2.5% for North America, 1.6% for the UK and 0.4% for Japan.

A 1% rise in insurance penetration can cut catastrophe burdens on taxpayers by 22% and increase investment in the national economy by 2%, the report says.

“After the devastating earthquakes in Japan and New Zealand, and severe flooding in Thailand and Australia, the impact of natural catastrophes is clear,” Lloyd’s CEO Richard Ward said.

“Economies across the world urgently need to address their disaster preparedness if they’re to cope with the fallout of events that are becoming both more frequent and more costly.”

The report says businesses must take a longer-term view of insurance risk and act to protect supply chains. Governments should invest in mitigation strategies such as flood barriers, open markets to private insurers and enhance building codes.

Insurers must understand risk in growth economies and develop products to suit those markets.

While Chinese catastrophe losses have been high, the Government acts like a “captive” national insurer, rebuilding to higher standards, the report says.