Hong Kong’s leading insurance regulator believes Bermuda can be a partner in building an insurance-linked securities market to address the huge natural catastrophe protection gap in Asia.

Clement Cheung, chief executive officer of the Insurance Authority of Hong Kong, was speaking on a panel of top global regulators at the 2026 BMA Forum at the Hamilton Princess and Beach Club.

He said climate change was bringing more frequent and severe typhoons to the Asia, where insurance penetration is low. He argued regulators had to become more proactive in addressing the issue.

“Globally the protection gap [the proportion of natural catastrophe losses not covered by insurance] is 52 per cent,” Mr Cheung said. “In my region the gap is 88 per cent, so in the Asia Pacific region only 12 per cent is covered by insurance.”

He also cited the retirement income protection gap in Hong Kong, whose population is projected to have 36 per cent of people over 65 by 2046.

“These protection gaps are an opportunity for the industry, but they are a responsibility for the regulator,” Mr Cheung said. “What role insurance can play to mitigate or share that responsibility is a dimension that we have to explore and leverage, seeking complementary strengths and synergies.”

One of Hong Kong’s strengths is its vibrant capital market, a leading venue for initial public offerings.

“There’s a lot of liquidity in that market,” Mr Cheung said. “We believe we can learn from Bermuda and try to deploy some of the capital to provide alternative capacity. Bermuda has been doing it tremendously well, but there are a lot of untapped resources in Asia.”

Bermuda leads the world in ILS and catastrophe bonds issuance, with capital attracted by its regulatory structure for special purpose insurers, Bermuda Stock Exchange platform, and reinsurance expertise.

Hong Kong’s fledgeling ILS market attracted $800 million last year, but Mr Cheung sees great potential for much more, if investors appreciate ILS as an asset class that not only offers yield and diversification, as it is uncorrelated to financial markets, but is also for the public good.

“When we open this market up, it will benefit not just Hong Kong,” he added. “It will benefit Bermuda as well — Bermuda is a very good partner for us.”

The European Union’s protection gap is also substantial, said Petra Hielkema, chairwoman of the European Insurance and Occupational Pensions Authority.

On the Eiopa website is a “nat cat dashboard”, which identifies how much of five perils are covered — it shows that 25 per cent of total losses from extreme climate-related events are insured, leaving a 75 per cent protection gap.

“Keep in mind that the 75 per cent is an average figure — in some member states the gap is 95 per cent and they are aware of it,” Ms Hielkema said.

“We update the dashboard every year and send a letter to every government to say, ‘this is your gap’, to trigger their attention.”

Eiopa, together with the European Central Bank, conducted a study that found potential benefits of mandatory insurance, she said.

“What we see is that uptake, of course, is bigger because it’s mandatory, but additional sales or further cover also go up,” Ms Hielkema said.

“Impact underwriting” — requiring certain mitigation and adaptation measures before providing the insurance — would be even more beneficial.

“That is where you can activate the whole system,” Ms Hielkema said. “You have consumers that need to mitigate and adapt city building codes, and insurers providing these products through impact underwriting. You need the capacity in the market, which is there.

“I don’t think we have an inability of the industry. We just have too little uptake. But ultimately, you will need public-private partnerships and some public intervention too, to make it happen, and to make sure it remains affordable.”

While government involvement would be needed, “the more that can be done by the private market, the better”, Ms Hielkema added.

Scott White, president of the National Association of Insurance Commissioners, the US standard-setting body, said secondary perils were driving up issues around insurance affordability and availability. The NAIC’s focus was on resilience, he added.

US state regulators were working to understand their markets better, for example through gathering detailed homeowner data at a zip code level, as well as insurer behaviour, particularly around shifting costs onto consumers through increased deductibles or exclusions.

“We’re also working on risk mitigation programmes and home hardening, replacing roofs, for example, to higher building code standards,” Mr White added.

“We started in Alabama, and it spread to other states. It started with hurricane risk and it’s now moved to wildfire risk in states like New Mexico and California, and even severe convective storms.”

By layering homeowner data onto other data, such as Federal Emergency Measures Agency hazard maps, and census data, states can target limited funds to where they can have the most impact.

“These resiliency efforts can lower the cost of claims and therefore premiums in our markets,” Mr White said. “And the issue we’re going to be focused on in the next few years is how to scale that.”

Armand Schouten, director, insurance supervision of the Dutch central bank, said the industry needed to better promote its critical role in helping communities around the world.

“I came to insurance supervision from outside of the insurance industry and I've learnt in the past year that it’s an incredibly complex industry to comprehend,” Mr Schouten said.

“I think that makes it sometimes difficult for people outside the industry to understand how important insurance is for society, for economic growth. It's about the peace of mind you provide to society, and being able to explain that is important.”