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 global insurance protection gap, or the gap between economic losses and those that are insured, widened in 2020 as pandemic related effects drove global macroeconomic resilience to decline by 18%, according to a measure by reinsurance firm Swiss Re.
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With the G7 meeting in Cornwall, UK beginning tomorrow and the COP26 only five months away, CEO’s of major global corporations are calling on world leaders to scale up climate risk transfer as part of the financial response to climate change.
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United Nations (UN) Secretary General António Guterres has again said that the world needs more catastrophe-triggered financing and better instruments to support the delivery of climate financing, to enhance disaster resilience, fund adaptation measures and finance climate risk.
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The Mesoamerican Reef system which lies in the Caribbean Sea, touching the coasts of Mexico, Belize, Guatemala and Honduras, is set to benefit from an innovative parametric insurance program to protect the reef and communities that rely on it against hurricane impacts.
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Driving home the importance of climate risk mitigation, resilience building and also the role of insurance or reinsurance in providing climate risk transfer, global reinsurer Swiss Re warns that the world’s economy risks a significant hit as the climate changes.
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Global Parametrics and specialist flood risk modeller Fathom have partnered to develop a global parametric flood index that can be used in triggers of risk transfer, insurance and reinsurance arrangements.
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The deepening of the world’s understanding, measurement and valuation of climate risks is going to drive a massive demand for contingent risk capital, which parametric triggers and insurance-linked securities (ILS) will be well-suited to serve, Rowan Douglas of Willis Towers Watson explained during our ILS NYC event this week.
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Central Asian countries will benefit from a better understanding of their natural disaster risks, which in time could lead to greater use of risk transfer, insurance and reinsurance capacity in the region, as the World Bank supports a multi-peril risk assessment project for the region.
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Quality and availability of data is seen as vitally important by insurance and reinsurance market players interested in covering drought related risks, as they seek to reduce basis risk in offerings, a survey from VanderSat has found.
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It is time for the world to act on climate change as it will play an increasing role in disaster losses, Torsten Jeworrek of reinsurance company Munich Re warned today.
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