Quantifying the Insurance Protection Gap for Natural Disasters in Nigeria: A Probabilistic Loss Modelling Approach

This study quantifies the insurance protection gap for natural disasters in Nigeria using probabilistic catastrophe loss modelling, estimating the difference between total economic losses and insured losses across major disaster types. The protection gap, the share of disaster losses not covered by insurance, represents a measure of community and national vulnerability to economic recovery challenges following major events. In Nigeria, the protection gap for natural disasters is estimated to be one of the largest in Africa due to extremely low insurance penetration combined with significant disaster risk exposure. This study develops a multi-peril probabilistic loss model covering flood, windstorm, drought, and earthquake risk for all 36 states and the FCT, calibrated using historical hazard and loss data from NEMA, the Nigerian Hydrological Services Agency, and the British Geological Survey for 2000 to 2023. Exposure data at the state level are derived from the 2023 National Population Commission census estimates and building stock surveys. Insured loss estimates are computed using NAICOM-reported property insurance penetration rates by state. Findings reveal a national natural disaster protection gap of over 95 percent, with average annual economic losses from natural disasters estimated at 850 billion naira against insured losses of approximately 40 billion naira. The flood peril accounts for the largest protection gap in absolute terms. The study contributes an original multi-peril Nigerian disaster loss model and recommends a government-backed national disaster insurance facility to begin closing the protection gap.

Keywords: protection gap, catastrophe loss modelling, natural disasters, flood risk, Nigeria.