Global regulators pivot to proactive oversight as protection gaps widen in ‘permacrisis’ era

Global insurance regulators are accelerating a shift from reactive supervision to a more proactive, forward-looking approach as they grapple with rising systemic risks and widening protection gaps.

They were speaking at the 2026 BMA Forum, entitled “Charting the Course: Managing Risk and Complexity in a Rapidly Evolving Landscape”, which took place in Bermuda this week, where senior policymakers highlighted how supervision is evolving to address a more complex and interconnected global risk environment.

The session, “Regulatory Executive Insights: Global Insurance Policymakers on Navigating Change in a Volatile Market”, brought together Craig Swan, CEO, Bermuda Monetary Authority, as moderator, alongside Armand Schouten, director insurance supervision, De Nederlandsche Bank; Clement Cheung, CEO, Insurance Authority of Hong Kong; Scott White, president of the National Association of Insurance Commissioners (NAIC), Commissioner, Virginia Bureau of Insurance; and Petra Hielkema, chairperson, European Insurance and Occupational Pensions Authority (EIOPA) (pictured left to right respectively).

Swan set the tone early by framing the discussion around the transition from traditional regulatory models to a more enabling role, asking how supervision is evolving “from a defensive safeguard into a proactive enabler of stability, innovation, and protection”.

Panellists agreed that this transformation is already underway, driven by lessons from past crises and the increasing complexity of global risks. Schouten pointed to the evolution since the global financial crisis, noting that supervision has become more forward-looking, with greater emphasis on business models, culture and behaviour.

“Having lived through the great financial crisis, a lot has changed already,” he said, adding that the resilience shown by insurers through recent shocks, including COVID-19 and geopolitical tensions, reflects both stronger industry practices and more proactive supervision.

However, he stressed that uncertainty remains a defining feature of the current landscape, citing climate change, cyber threats and geopolitical developments as ongoing challenges that require continued adaptation.

Hielkema built on this, describing a structural shift in regulatory thinking as risks become increasingly interconnected. She highlighted a move “from microprudential to system-wide resilience,” as supervisors look beyond individual firms to assess how risks transmit across the broader financial system.

At the same time, regulation is shifting “from rule setting to risk anticipation,” with greater use of stress testing, scenario analysis and forward-looking supervision, she said. A third shift is toward enabling the industry, with regulators supporting innovation and mitigation efforts rather than simply enforcing compliance.

Central to this evolution is the growing focus on the protection gap, which panellists described as both a systemic risk and a societal challenge.

Cheung emphasised the scale of the issue, noting that global insured losses from natural catastrophes represent less than half of total losses. “We paid out something shy of $110 billion last year, but that’s only 48% of the losses,” he said, adding that in Asia-Pacific the gap is even more pronounced, with only 12% of losses insured.

“The protection gap is an opportunity for the industry, but it’s a responsibility for the regulator,” Cheung said, stressing the need for collaboration between public and private sectors to address the imbalance.

He also pointed to demographic trends, particularly ageing populations, as another major protection gap, raising questions about how insurance can support long-term financial resilience in societies where the proportion of elderly citizens is rapidly increasing.

Hielkema defined the protection gap as the difference between expected losses and insured losses, noting that in Europe only around 25% of climate-related losses are covered. In some countries, the gap is as high as 95%, she said, underlining the urgency of the issue.

Addressing these gaps requires better data, improved risk understanding and stronger incentives for prevention, panellists agreed. White highlighted how US regulators are investing in data-driven tools to gain deeper insights into insurance markets, including granular analysis of availability and affordability.

“We’re going to have a much better handle on availability and affordability… at a zip code level,” he said, pointing to new data initiatives that capture nearly the entire US homeowners market.

This improved visibility is enabling more targeted resilience measures, including risk mitigation programmes such as home hardening and updated building standards. These efforts are designed to reduce losses and ultimately improve affordability.

Prevention was repeatedly identified as the most effective lever in narrowing protection gaps. Hielkema stressed that mitigation must come first, warning that relying solely on insurance or post-event funding is unsustainable as risks continue to rise.

At the same time, public-private partnerships are seen as essential to scaling solutions. Mandatory insurance schemes, impact underwriting and government-backed programmes were discussed as ways to increase coverage while maintaining affordability and market stability.

The role of regulators themselves is also changing, with a greater willingness to take an active role in shaping outcomes. Cheung said regulators must move beyond passive oversight and be prepared to take calculated risks to drive progress.

“Traditionally, we stand and watch… but the difference is we’ve got to start taking some risk ourselves,” he said, highlighting efforts in Hong Kong to mobilise capital and support innovation, including in the insurance-linked securities market.

White reinforced the importance of collaboration across jurisdictions, particularly in areas such as reinsurance and alternative capital, which play a critical role in expanding capacity and addressing protection gaps.

As the discussion concluded, there was broad consensus that the role of regulation is expanding. No longer confined to safeguarding stability, supervisors are increasingly expected to enable resilience, support innovation and help address broader societal challenges.

In a world defined by interconnected risks and persistent uncertainty, that shift is set to redefine the future of insurance supervision.

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