CHALLENGES IN INSURING AGAINST CATASTROPHIC RISKS

This paper addresses the key challenges in insuring against catastrophic risks, with a particular focus on flood risk as one of the most complex and economically significant natural hazards in contemporary conditions. These challenges stem from the increasing frequency and severity of extreme events, the spatial and temporal correlation of losses, high loss severity, as well as methodological difficulties in risk measurement and persistent institutional and market constraints reflected in the protection gap between economic and insured losses. The paper examines the extent to which different flood insurance models can contribute to addressing these challenges. The findings indicate that no single institutional model provides a universally optimal solution. While public models improve accessibility and social protection, and private models enhance risk-based pricing and efficiency, both exhibit significant limitations when applied in isolation. Public–private arrangements, when supported by robust risk assessment and a clear allocation of responsibilities, offer the greatest potential to reduce the protection gap and ensure more sustainable, resilient financial protection against flood losses.