Asian Development Bank looking at catastrophe bonds for the region

by Artemis on November 29, 2011

The increasing incidence and impact of natural disasters and severe weather events in Asia is an important topic for the reinsurance and risk transfer markets. As development of infrastructure in Asian nations continues apace, incomes increase more quickly and insurance penetration grows the amount of exposure in the region is growing fast and solutions to protect business and lives from natural disasters and weather risk become increasingly important.

The Asian Development Bank is one organisation which is working to address the impacts of these catastrophe events with governments in the region. This news article from Reuters explains some of the issues that the region faces. It quotes a representative of the Asian Development Bank as saying that they are working with Philippines, Vietnam and Indonesia to create country risk assessments which would help them to identify the weather and disaster threats, the costs of recovery from such events and also to look at mechanisms to finance recovery from these events including catastrophe bonds.

Cat bonds are receiving a lot of attention around the world from governments looking for ways to finance the countries economic and infrastructural recovery after a disaster strikes. These, mostly research driven, investigations into risk transfer techniques such as cat bonds provide opportunities for established players in the reinsurance and risk financing markets to assist these governments to get the right balance of risk transfer, risk retention and reinsurance for their economies.

The rate at which development is increasing across Asia makes the creation of risk financing strategies an urgent process for these nations before the exposures become too large for them to bear and alternative risk transfer tools such as catastrophe bonds are well placed to help them offload some of their risks to the capital markets.

Read our recent article about reinsurer Munich Re’s insight into increasing disasters and weather events in Asia.

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