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Investments offer opportunities, but also risks. The current challenges, from climate change to economic uncertainties, make it essential to comprehensively secure investments. Would you like to learn more about tailored protection? Contact us for personal advice.
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Coverage gaps threaten your investments. A comprehensive risk analysis and suitable insurance coverage are essential to minimise financial losses.
The natural hazard insurance is often insufficient in Germany. Only 54% of households are adequately protected, which leads to significant financial risks in the event of damage. An individual assessment is advisable.
Transparent corporate governance and risk management are crucial for investment security. Taking cyber risks into consideration and adapting to climate change are essential.
The world of investments is dynamic and carries both opportunities and risks. It is all the more important to protect yourself against unforeseen events that could endanger your investments. Comprehensive risk assessment and the minimisation of coverage gaps are essential in this regard. This article shows you how to secure your assets in uncertain times through clever strategies and the right insurance. Avoid costly mistakes and ensure worry-free financial well-being.
Investments are a key building block for wealth accumulation and financial independence. But what happens when unforeseen events such as natural disasters, cyber-attacks, or economic turbulence threaten your investments? This is where the concept of a coverage gap comes into play. A coverage gap arises when existing insurance coverage is insufficient to fully cover financial losses. This can have devastating consequences and significantly reduce your investments.
Auctoa supports you in making informed investment decisions and optimally protecting your assets. Our expertise in real estate valuation and analysis helps you identify risks early and take appropriate measures. Learn more about our services in the real estate sector.
The global protection gap is a growing issue with significant impacts on the world economy and the financial stability of individuals and businesses. According to a study by Swiss Re, the global protection gap amounted to USD 1.2 trillion in 2018 (Swiss Re Study). This sum includes damages from natural disasters, mortality, and health that are not covered by insurance. Thus, the protection gap represents a substantial uninsured risk.
The World Bank also addresses the 'Global Protection Gap' in the realm of disaster risk management (World Bank). Unfortunately, the linked page is currently unavailable (404 error), highlighting the importance of checking and ensuring the availability of critical information. Such an error underscores an operational risk and the need to verify URL accuracy and report broken links to ensure access to vital information on disaster risk financing.
The causes of the global protection gap are varied. They include a lack of risk awareness, insufficient financial resources, inadequate insurance products, and regulatory hurdles. The consequences of the protection gap can be devastating, especially for low-income populations and developing countries, which are often most affected by natural disasters. Closing the protection gap thus requires a collaborative effort from governments, insurance companies, international organizations, and individuals.
Macroeconomic Impact of the Protection Gap
The protection gap affects not only individual levels but also the overall economy. Uninsured damages from natural disasters can lead to production losses, infrastructure damage, and a decline in economic growth. They also burden public finances, as governments often have to bear the costs of disaster relief. A Swiss Re study shows that the macroeconomic resilience of the global economy has diminished since 2007, mainly due to exhausted monetary policy and the fragile banking landscape in the Eurozone. Closing the protection gap through increased insurance penetration could enhance global financial resilience by over USD 1 trillion per year.
Insurance Closes the Protection Gap
Insurance plays a crucial role in closing the protection gap. It provides financial protection against unforeseen events and helps mitigate the economic impact of damages. However, it is important to choose the right insurance coverage that meets individual needs and risks. Comprehensive advice from an experienced insurance expert is essential in this regard. They can help you analyze your risks and find the appropriate insurance solution. Auctoa offers you comprehensive information and support in selecting the right insurance coverage for your investments.
In Germany, there is a significant gap in coverage in the area of elementary damage insurance. Although almost all residential buildings are insured against storms and hail, only about 54% of households have sufficient protection against other natural hazards such as flooding, earthquakes, snow pressure, and avalanches (German Bundestag). This means that many homeowners are left to cover the costs themselves in the event of elemental damage, putting their investments at risk.
The coverage gap for elemental damage varies greatly depending on the federal state. While Baden-Württemberg has a high insurance density due to a historical compulsory insurance, it is significantly lower in other federal states. This demonstrates that regional differences in risk perception and insurance conditions play an important role. It is therefore advisable to inform yourself individually about the risks and insurance options in your region.
Climate change increases insurance premiums
Climate change further exacerbates the issue of the coverage gap. Increasing extreme weather events such as heavy rain, heatwaves, and storms lead to higher damages and rising insurance premiums. This challenges many homeowners to afford adequate insurance coverage. At the same time, insurance companies may threaten to withdraw from high-risk areas, which would further increase the coverage gap. It is therefore crucial that policymakers, the insurance industry, and individuals work together to find solutions to make elementary damage insurance affordable and widespread.
Other coverage gaps
Aside from elemental damage, there are coverage gaps in other areas of private and commercial insurance. These include, for example, cyber risks, business interruptions, and damages from new technologies. Here too, it is important to be well-informed and regularly review and adjust your insurance coverage. A professional risk analysis helps you identify potential coverage gaps and take appropriate measures. Auctoa offers you comprehensive information and support in the field of insurance to help you choose the right insurance coverage for your investments.
The Compugroup case, covered in an article by the FAZ (FAZ Artikel), highlights the importance of transparency and good corporate governance in investments. The article explores a potentially problematic business transaction involving Compugroup, its founder Frank Gotthardt, and his son Daniel Gotthardt. It emphasises the necessity of transparency and oversight in transactions with related parties, especially when these individuals exert significant control (more than half of the votes) within the company. Such transactions may be viewed critically by independent shareholders and require adherence to specific transparency obligations.
This situation underscores the need for solid corporate governance and independent supervision to minimise potential conflicts of interest and ensure fair dealings for all shareholders. A transparent and responsible corporate governance is therefore an important protective mechanism for investors.
Risks in dealings with majority shareholders
Deals with majority shareholders pose particular risks, as they often have a significant influence over company decisions. It is therefore important that such transactions are carefully examined and monitored by independent bodies. Transparent disclosure of all relevant information is essential to ensure the trust of investors. Auctoa places great emphasis on transparency and responsible corporate governance. We support you in making well-informed investment decisions and optimally protecting your assets.
The macroeconomic resilience of the global economy has diminished since 2007, primarily due to exhausted monetary policy and a fragile banking landscape in the Eurozone (Swiss Re study). This means that the world economy is more susceptible to shocks and crises. In this context, insurance plays an important role in strengthening resilience and stabilising the economy.
Insurance Resilience Indices (I-RI) measure a country's or region's ability to recover from economic shocks. They take into account factors such as the prevalence of insurance, the quality of insurance products, and the efficiency of claims handling. Countries with high I-RI are better equipped to cope with the consequences of natural disasters, economic crises, and other shocks. The Swiss Re study shows that North America (USA & Canada) has the highest macroeconomic resilience due to stable frameworks and fiscal leeway. The Eurozone has recorded the largest decline since 2007, highlighting the vulnerability of public finances and the banking system.
Strategies for Closing the Protection Gap
To close the protection gap and strengthen resilience, various strategies are required. In the field of life insurance (Mortality Protection Gap), insurers should utilise behavioural economics to better understand customer behaviour, simplify risk assessment to improve accessibility and reduce transaction costs, as well as enhance the customer experience to demonstrate the value of life insurance. In the area of health insurance (Health Insurance Resilience), the focus should be on expanding pre-funded healthcare services, given the financial pressures on the public sector. For commercial insurance, cyber risks, intangible assets, and business interruptions represent significant growth areas. Innovative solutions, including parametric triggers and structured solutions, are required to address these complex risks.
Closing the protection gap requires a multi-stakeholder approach that involves collaboration between governments, regulators, insurers, individuals, and businesses (Swiss Re study). It is important to remove barriers on both the supply and demand sides. Product and process innovations, microinsurance, behavioural economics, and alternative distribution channels are key strategies in this regard.
Governments play a crucial role in establishing a transparent and stable legal framework. They should create transparent legal structures, enforce liability laws, and mandate minimum coverage. Moreover, they can promote insurance uptake through vouchers, tax incentives, and actively promoting insurance as a risk transfer mechanism. The insurance industry itself needs to develop innovative products and processes that meet customer needs and make insurance uptake more attractive.
Prevention Reduces Risks
However, insurance is no substitute for prevention. Building regulations must be adapted to the realities of climate change. Building codes and spatial planning should prioritise climate-resilient construction methods and avoid construction in high-risk areas. The absence of clear codification of state liability law allows construction in known flood zones. A comprehensive risk assessment and the implementation of preventive measures are therefore essential to narrow the protection gap and strengthen resilience.
The energy transition in Germany presents a significant challenge and requires substantial investment in grid expansion and flexibility of the energy system (Deutscher Bundestag). The concentration of renewable energy generation in the north and east, with consumption in the south and west, poses a major challenge for power transmission from north to south. This is further intensified by the phase-out of nuclear power, coal mining, and the increasing cross-border electricity trade. Redispatch strategies are crucial for managing network bottlenecks.
Gas-fired power plants are needed to bridge the gap. The number of gas-fired power plants varies depending on assumptions about demand flexibility and the required reserve capacity. Several studies predict capacity shortages despite the use of coal-fired power plant capacities as a reserve. Demand-side flexibility and storage solutions are critical for integrating intermittent renewable energies and reducing the need for excessive grid expansion and controllable generation capacity.
Hydrogen as a Key Element
The expansion of renewable energies, especially wind and solar, is essential for achieving climate neutrality, but requires a significant acceleration to meet the growing electricity demand from sector coupling and new industries. Hydrogen will play a central role in climate neutrality across various sectors (transport, industry, district heating, etc.). Increased sector coupling and electrification are expected to lead to higher electricity demand and peak loads in the medium to long term.
The future of risk management and investment security will be shaped by technological innovations, political changes, and continuous research and development initiatives. In the insurance sector, innovative technologies such as artificial intelligence, big data, and blockchain are promising for better assessing risks, personalising insurance products, and speeding up claims processing. Political changes and improvements in the area of regulation and supervision can also help reduce the protection gap and increase the stability of the financial system.
Continuous research and development initiatives are essential for early identification of new risks and developing effective risk control strategies. The importance of ongoing efforts to reduce the protection gap cannot be overstated. Only through a joint commitment from governments, insurers, businesses, and individuals can we succeed in enhancing investment security and minimising the economic impact of unforeseen events.
Key Benefits of Investitionssicherheit
Here are some of the key benefits you will achieve:
Financial Stability: Protection against unforeseen events and minimisation of financial losses.
Asset Building: Securing your investments and building wealth over the long term.
Peace of Mind: Reassurance that your investments are optimally protected.
The minimisation of coverage gaps and the protection of your investments is an ongoing process that requires continuous engagement with current risks and insurance options. Auctoa supports you in optimally safeguarding your investments and protecting your assets from unforeseen events. Our expertise in property valuation and analysis helps you to identify risks early and take appropriate action. Learn more about our services in real estate and finance.
Investments in the future are important, but protecting those investments is crucial. Avoid costly mistakes and secure your financial well-being. Contact us today to start your personalised consultation and optimally safeguard your investments. Contact us now and let our experts advise you on how best to protect your investments.
The Swiss Re Study analyses the global protection gap and its impact on the world economy.
The Deutsche Bundestag provides information on the status of natural disaster insurance in Germany.
The Deutsche Bundestag highlights the necessary investments in network expansion for the energy transition.
An FAZ article discusses the importance of transparency and good corporate governance using the example of Compugroup.
What is meant by a coverage gap in investments?
A coverage gap arises when the existing insurance coverage is insufficient to fully cover the financial losses of an incident. This can significantly reduce your investments.
Why is natural hazard insurance important in Germany?
Although many buildings are insured against storm and hail, only about 54% of households have protection against additional natural hazards such as floods. Climate change increases the risk and necessity of such insurance.
How does corporate governance affect investment security?
Transparent and responsible corporate governance minimizes conflicts of interest and ensures fair dealings for all shareholders. This is particularly important during transactions with majority shareholders.
What role do insurances play in strengthening the global economy?
Insurances stabilize the economy by covering financial risks and enhancing resilience to economic shocks. Countries with high insurance resilience indexes (I-RI) recover faster from crises.
How can governments encourage the uptake of insurance?
Governments can increase insurance uptake through transparent legal frameworks, liability laws, and promoting insurance as a risk transfer mechanism.
What significance does the energy transition have for investments?
The energy transition requires significant investments in grid expansion and the flexibilization of the energy system. Gas power plants and hydrogen play a key role.
How can I optimally secure my investments?
A comprehensive risk analysis, choosing the right insurance coverage, and continuously reviewing the insurance conditions are crucial to optimally secure your investments.
What role does prevention play in minimizing risks?
Insurances are not a substitute for prevention. Building regulations must be adapted to climate change, and climate-resistant construction methods should be prioritized.
