A fairly strident cry in a recent Financial Times article from the head of one of the world’s largest insurance brokers called for more private equity commitment to the insurance sector – to cover huge potentially unfunded liabilities. “If we don’t bring in a trillion dollars in alternative capital in the next decade, we’ve failed,” Aon chief executive Greg Case said.
Case’s rationale was that the protection gap between insured losses and actual losses due to climate change-related natural disasters and other causes had grown far beyond the readiness of traditional investors to cover. Aon figures quoted by the FT implied that less than one third of the losses to natural disasters since 2000 had been covered by insurance.
A March 2025 Bain & Co. report, “Bridging the Protection Gap: Affordability, Access, and Risk Prevention”, calculated that “only one-quarter to one-third of the damage from natural disasters will be covered by insurance by 2030; for mortality, it would be less than half”. Healthcare-related protection gaps in particular could amount to some US$1.4-1.5 trillion by 2030, according to Bain.
The same report also notes that “insurers are increasingly turning to a wider set of alternative instruments” to cover the gaps in their balance sheets, adding that “many carriers partner with alternative asset managers for investment expertise”. Bain also notes that “several regulatory bodies generally support these moves, as long as policyholder protection and systemic risk mitigation remain priorities. But even these sources of private capital may not be enough to handle exposure to climate, cyber, and pandemic catastrophes”.
Some readers will surely have spotted that Case’s $1 trillion ask tallies with the high volume of dry powder sitting on private equity firms’ books – some $500 billion for buyout firms alone, according to currently accepted estimates. Potentially, that dry powder could be burned off by investing into a sector like insurance in dire need of new and different capital infusions. However, the FT’s Alphaville has also just run a detailed and highly complex analysis of the intersection between private capital and insurance, raising a number of red flags around potential conflicts of interest and related risks. In particular, as the FT emphasises, private equity firms that buy insurers, or at least portfolios of their liabilities, gain control over where those insurers invest, and can use the resultant investments to their own advantage. “While more diversified investments and greater risk-sharing can, in principle, support insurers’ resilience, losses in private markets could propagate risks across an increasingly interconnected and complex insurance landscape”, warned the Bank of International Settlements.
Thanks to climate change and rising asset prices, there is little question that insurers need new sources of capital. New levels of risk of a systemic collapse in this key area of the financial system would be a high price to pay though.
