Innovative risk-transfer solutions can help to close identified protection gaps and increase personal and societal resilience. In this context, the insurance-linked securities (ILS) market, as a form of alternative risk transfer, has been at the forefront. The actuarial techniques play a key role in the valuation of catastrophe instruments.

According to the Swiss Re Institute's sigma report No. 1/2023, natural disasters resulted in global economic losses of USD 275 billion in 2022, of which only USD 125 billion were covered by insurance, the fourth highest one-year total. In Europe the economic and insured losses amounted to approx. USD 20 and 11 billion, respectively. With climate change, environmental devastation, global inflation and ever more people concentrated in high-risk areas, natural catastrophes such as earthquakes, floods, hurricanes, wildfires and winter storms have become more intense and frequent in recent years, posing a threat to people and economies worldwide. The financial burden of such events is enormous, but despite this threat many people and businesses remain uninsured leaving them vulnerable when a natural catastrophe does strike. A large protection gap weakens the financial resilience of economies as lack of insurance makes it more difficult for businesses and people to recover from disasters.