Huang Hong, Vice Chairman of the China Insurance Regulatory Commission (CIRC) has echoed the views of the Head of the Chinese State Council, Premier Li Keqiang, and called for improved catastrophe risk management in China underpinned by both traditional and alternative risk transfer.
On June 10th 2017 the Institute for Disaster Risk Management and Catastrophe Insurance of Nankai University, China was established, and Hong attended the inaugural ceremony alongside other industry experts and executives. The First Catastrophe Insurance Forum of Nankai University occurred at the same time, with more than 200 industry experts in attendance.
In order to modernise national governance in China Hong highlighted the need for innovative insurance mechanisms that support disaster risk management.
China is susceptible to a range of natural disaster and climate-related events, and as in many parts of the world insured values are rising likely faster than catastrophe insurance take-up rates, suggesting a need for innovative solutions from the insurance, reinsurance, and also insurance-linked securities (ILS) space to mitigate the potential threat.
According to reports less than 10% of the total economic loss experienced in China in 2016 from natural disasters was covered by some form of insurance protection, which reveals a wide protection gap and subsequent opportunity to bring a substantial volume of Chinese risk to the global risk transfer market, taking the post-event refinancing burden away from the Chinese government.
The need for risk transfer was highlighted recently by Head of the Chinese State Council, Premier Li Keqiang, who stressed that China’s focus on disaster risk management requires reinsurance and ILS support.
And while the message from Hong has a clear focus on the need to modernise China’s national governance via the use of innovative insurance mechanisms that address disaster risk management needs, he does underline a need for public and private sector cooperation, and suggests the need to use the full remit of the risk transfer world.
Having learnt from international experience, Hong said that the “application of insurance mechanisms and catastrophe reconstruction means, you can cross time and space, and even in the capital markets and the global diversification of risk.”
This suggests that Hong understands and appreciates the to diversify China’s catastrophe, or disaster risk outside of the traditional insurance and reinsurance markets, and utilise the innovative and willing base of capital markets investors to support and drive forward the country’s catastrophe insurance market and disaster risk management needs.
“Advancing catastrophe insurance requires the concerted effort of all parties,” continued Hong, again alluding to the need for public and private sector cooperation, that likely includes all elements of the global catastrophe insurance market, of which ILS, or alternative capital is becoming a stronger and stronger presence.
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