Guy Carpenter wins California Wildfire Fund reinsurance program

Reinsurance broker and advisor Guy Carpenter has been selected as the sole reinsurance and risk transfer intermediary for the recently established California Wildfire Fund, which is administered by the California Earthquake Authority (CEA).

As we previously reported, the California Earthquake Authority (CEA) has gained an expanded remit by taking on administrative responsibility for the newly enacted and in process of being set-up Wildfire Fund for the state of California.

This $21 billion wildfire insurance fund is designed to provide capital to cover some costs utilities operating in California may face due to payments to victims after wildfires that their own infrastructure causes.

Part of the CEA’s remit is to assess the need for reinsurance and other forms of risk transfer, likely including catastrophe bonds and insurance-linked securities (ILS), then to purchase them where needed.

Guy Carpenter has now been selected to deliver strategic reinsurance and advisory services to create a risk transfer and reinsurance strategy for the California Wildfire Fund.

The CEA and Guy Carpenter are to work together to “increase the longevity of the California Wildfire Fund and enhance its claims-paying capacity,” the company said.

“We are delighted to be selected as the exclusive reinsurance and risk transfer advisor for the California Wildfire Fund. We are looking forward to bringing our public sector and wildfire expertise to deliver results for this very important initiative for the residents of California,” commented David Priebe, Vice Chairman of Guy Carpenter.

Guy Carpenter said that it leveraged its analytics expertise, as well as its strategic partnerships in solving for the California Wildfire Fund.

That included its established modelling partnership with catastrophe specialist AIR Worldwide for proprietary wildfire modeling data and Guy Carpenter’s exclusive licensing of the Tyche financial and capital modeling platform.

Leveraging these alongside its own proprietary GC MetaRisk solution, Guy Carpenter said it created real-time sophisticated capital models allowing it to test the optimal reinsurance and risk transfer structures for the program.

Guy Carpenter has an established wildfire risk portfolio, including its proprietary GC Wildfire Diagnostic tool, which features hazard-based accumulation reports; its Annual Wildfire Symposium; its demonstrable experience in delivering reinsurance solutions for utilities, including catastrophe bond solutions; wildfire catastrophe modeling; meteorological expertise; and capital modeling solutions.

Reinsurance brokerage for the Wildfire Fund program will be delivered through Guy Carpenter’s California offices in Glendale and Mission Viejo, the company said.

Priebe added, “Guy Carpenter is focused on helping the public sector at the national, state and municipal levels. By leveraging private capital for public risks and innovative tools, we are able to help public entities mitigate risk and improve their communities.”

Guy Carpenter’s capital markets unit GC Securities was responsible for both of the utility focused wildfire cat bonds issued to-date, the stricken PG&E transaction Cal Phoenix Re Ltd. (Series 2018-1) and Sempra Energy’s SD Re Ltd. (Series 2018-1) cat bond transaction.