The protection gap – underinsurance in emerging and developing economies and the gap between economic and insurance losses – the opportunity that is on every reinsurance CEO’s lips and which presents the largest opportunity to put excess risk transfer capital to use, requiring both traditional and capital markets support.
In a market that is faced with abundant and ongoing pressure, from excess capital, new entrants, the capital markets, reductions in buying, consolidation of reinsurer panels and difficult global financial market conditions, the reinsurance industry is focusing on the next big opportunity.
This opportunity provides both reinsurers and ILS fund managers with an opportunity to assist in building the world’s resilience to disaster risks, while providing rapidly paying post-event risk finance, at the same time as growing the world’s catastrophe risk markets.
It’s win-win for both sides, those in need of resilience and disaster risk financing and the re/insurance and ILS market which is keen to expand into new regions, perils and opportunities. Narrowing the protection gap is expected to be a key focus for years to come.
At a recent climate finance focused event, Pakistan’s Minister for Climate Change, Sherry Rehman, called on international governments to place climate finance and losses at the heart of COP 27 talks next year, with catastrophe bonds one instrument seen as having a role.
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The country of Madagascar is the latest to benefit from a payout under its parametric drought insurance coverage from the African Risk Capacity (ARC), with almost $800k to be disbursed to the government.
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A new collaborative initiative between global reinsurance broker Gallagher Re and pan-African reinsurer Africa Re aims to strengthen countries against a broad range of climate, crisis and disaster risks and may utilise third-party reinsurance capital alongside traditional to augment capacity.
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Broking group WTW, working with the Mesoamerican Reef Fund and InsuResilience Solutions Fund, has announced a renewal and expansion of the innovative parametric hurricane insurance program to protect the coral reef, while adding additional capacity from reinsurance firm Munich Re.
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The global insurance protection gap, or the gap between economic losses and those that are insured, increased again in 2021, reaching a new all-time high of US $1.42 trillion, according to reinsurance giant Swiss Re.
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The African Risk Capacity (ARC) has paid out and already disbursed US $5.3 million to the Government of Zambia after the African nations parametric drought insurance coverage was triggered.
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The African Risk Capacity (ARC) will make at least a US $14.2 million payout to benefit the people of Malawi, after the country’s parametric drought insurance coverage was triggered.
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The UK-funded Centre for Disaster Protection has announced a number of new additions to its team, with an experienced disaster risk financing expert joining it from her most recent role at the World Bank, where she had worked on catastrophe bonds and insurance-linked securities (ILS) arrangements.
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The global insurance and reinsurance market faces a range of challenges, but at the same time the opportunities for the sector and for the provision of efficient capital to absorb societal risks, is also expanding, with PwC estimating that the global protection gap may expand to US $1.86 trillion by 2025.
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The United Nations Development Programme (UNDP) has announced a partnership on parametric insurance development for the most vulnerable with global insurer and asset management group Generali this morning.
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