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.
The world of disaster risk transfer and financing for the developing world and development communities is getting increasingly interesting and relevant to the ILS world, with the latest news being the imminent launch of Global Parametrics, a parametric risk transfer provider backed by a third-party capitalised risk fund.
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Despite the insurance, reinsurance and ILS landscape being awash with “smart capital,” the majority of the world remains either underinsured or uninsured, highlighting the challenge for the risk transfer industry to develop the right mechanisms to enable capital deployment where it’s needed most.
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The presence of alternative capital in the global reinsurance marketplace has enabled Bermudian insurers and reinsurers to be innovative in their efforts at closing the protection gap, according to Bradley Kading of the Association of Bermuda Insurers and Reinsurers (ABIR).
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A continued and advanced use of science to enhance risk modelling, innovation to drive efficiency, and the experience and skills of the global risk transfer landscape are required to support and improve global disaster resilience efforts, according to speakers at a recent Start Talks event.
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The African Risk Capacity (ARC), Africa’s first sovereign catastrophe insurance pool, has ambitions to grow the size of the risk pool to $1.5 billion by 2020, as it increases the number of countries covered and expands products beyond drought, to include flood and cyclone risk.
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Emerging markets are expected to be the next source of insurance premium growth through the next decade, with the majority of increased penetration occurring in Asian countries, according to reinsurance giant Munich Re.
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The Insurance Development Forum (IDF), an international group consisting of insurance and reinsurance industry representatives, in partnership with the World Bank and the United Nations (UN), has announced the appointment of leading industry CEOs.
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Boosting insurance and reinsurance penetration in emerging markets is seen as key to building global disaster resilience and creating opportunities for re/insurers. But there’s also scope for companies to seriously look at expanding coverage in frontier markets, according to reinsurance giant Swiss Re.
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The ILS market continues to provide valuable support in terms of both capacity and its features to vital natural catastrophe schemes across Europe, helping to alleviate some of the financial burden felt by governments when disaster strikes.
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The Insurance Development Forum, a group formed of insurance and reinsurance industry representatives, alongside the World Bank and United Nations, held its first meeting last week laying out priorities as it seeks to help governments reduce future disaster losses and narrow the protection gap.
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