Guy Carpenter practice to focus on catastrophe risk for governments

A new practice team at reinsurance broker Guy Carpenter will focus exclusively on the catastrophe risk transfer needs of government agencies and entities. The Public Sector Specialty Practice will provide solutions aiming to relieve the cost of catastrophes for these entities.

The new global practice brings together a variety of teams at the reinsurance broker, seeking to provide the best catastrophe risk management and transfer solutions to government entities and public sector agencies. Often these entities are under-insured and can end up paying for catastrophe costs out-of-pocket.

Around 73%, or $2.7 trillion, of global natural catastrophe losses between 1970 and 2014 were uninsured, according to Guy Carpenter. These unfunded exposures to uninsured property, health, life and employment losses extend well beyond natural catastrophes as well, including man-made disasters and impacts from emerging risks. Risks such as cyber-attacks, infectious disease, and environmental accidents are just some of the threats that public entities are expected to respond to, despite fiscal constraints and lack of insurance cover.

Private sector risk financing and transfer will help to relive the burden on taxpayers and public finances, as well as transferring the management of these catastrophe and other exposures to insurance, reinsurance and capital markets capacity providers, where the management of these risks is better placed.

Guy Carpenter’s Public Sector Specialty Practice currently advises around 100 public sector entities, with work covering pre-event reinsurance mechanisms around the world in order to address catastrophic risks such as including earthquake, hurricane, flood, and terrorism.

The broker also helps entities in the public sector to address risks including property, workers compensation, credit, healthcare, and micro-reinsurance.

Guy Carpenter’s newly launched Practice aims to address the lack of insurance cover for many public sector risks, by delivering both traditional reinsurance and capital market solutions, as well as helping public entities to understand their exposures and how to finance them.

The global multi-disciplinary team is made up of resources from broking, including the Workers Compensation Specialty Practice, the Residual Markets team and GC Analytics. Guy Carpenter will also harness expertise from other operating companies within the Marsh & McLennan group, including Marsh, Mercer and Oliver Wyman.

The importance of the capital markets in providing these public and government entity risk transfer solutions is clear, meaning that the insurance-linked securities (ILS) and capital markets team at Guy Carpenter will play an important role as well.

Dedicated resources from GC Securities, which has delivered a number of the ILS and reinsurance industry’s most innovative catastrophe bonds on behalf of public entities, will join the practice. Given the uninsured nature of many of these risks, catastrophe bonds can make ideal solutions for transferring them to capital markets investors.

“Given the increasing challenges associated with risk management and the impact that catastrophic loss can have on the fiscal position and tax base of government entities across the globe, we believe greater coordination is required to manage this risk across the public and private sectors,” commented Britt Newhouse, Chairman of Guy Carpenter and Chair of the Public Sector Specialty Practice. “With our extensive experience, global resources and market insight we are uniquely positioned to help public entities identify the best solutions to transfer this risk to the private sector,” Mr. Newhouse said.

“Public sector entities are grappling with a host of challenging societal pressures that are being exacerbated by changing demographics, such as aging populations and growing exposure to natural and man-made catastrophes,” said Jake Clark, Managing Director and leader of the firm’s Public Sector Practice in North America. “Guy Carpenter believes there is a growing need to build and expand effective public-private partnerships to more effectively manage the challenges associated with catastrophic loss because of the fiscal constraints brought on by unprecedented economic and budgetary burdens, including expanding public sector debt. In many cases these represent unfunded loss exposures that fall on the backs of taxpayers or communities that lack the fiscal resources to efficiently manage them.”

“This unique initiative demonstrates our commitment to the strategic development of public-private partnerships and to increasing the availability of insurance and reinsurance worldwide to tackle this issue through a range of all market solutions,” said Charles Whitmore, the leader of the Property Solutions Group, where Guy Carpenter’s Public Sector Specialty Practice resides in EMEA.

Peter Book, Head of Agriculture Practice for the Asia Pacific Region, will lead this effort in Asia Pacific and Aidan Pope, CEO of Latin America and Caribbean (LAC) Operations, will oversee the team for the LAC region.