Protectionism hurts ability to close insurance coverage gap: Swiss Re


Protectionist practices have a detrimental effect on the ability of the global insurance and reinsurance industry to close the protection gap between economic losses and those covered by insurance, according to reinsurer Swiss Re’s Chief Economist Kurt Karl.

As a direct result of protectionist regulatory and political practices global reinsurer Swiss Re finds it has a reduced ability to provide re/insurance protection in some markets, which means the company cannot help support the expansion of insurance in those regions as much as it would like, through provision of reinsurance capital to back local insurers.


World Bank helps Vietnam on transfer of natural disaster risks


The Vietnam Ministry of Finance and the World Bank in Vietnam, at a workshop on disaster risk finance and insurance, discussed the need for a financial protection strategy to better protect the country and its residents against the financial and social impacts of natural disasters.

During the workshop, which was held in Hanoi, Vietnam on November 15th 2016, a catastrophe risk model was unveiled, which showed that Vietnam is likely to experience, on average each year, $1.4 billion (VND 30.2 trillion) in physical damages from flooding, typhoons, and earthquake events.

According to the catastrophe risk model this suggests that there’s a 40% chance that Vietnam will incur damages above $6.7 billion (VND 141.2 trillion) from flooding, typhoons, and earthquakes, in the next 50 years. Furthermore, the World Bank explained that residential assets contribute 65% of total damage, while public assets contribute 11% of the total damage.


ILS expansion could stimulate liquidity demand: WCMA


In recent times illiquid insurance-linked securities (ILS) investments, such as collateralised reinsurance, has overtaken the catastrophe bond space as the main source of ILS capacity. But the benefits of a liquid asset class and the expansion of third-party capital could increase demand for liquid ILS, according to WCMA.

Willis Capital Markets & Advisory (WCMA), the capital markets division of Willis Towers Watson (WTW), in its recent Q3 ILS Market Report, has discussed the potential for increased investor demand for liquid ILS solutions, i.e. catastrophe bonds.

Broader insurance and reinsurance market conditions have helped the rise of collateralised reinsurance placements in recent times, according to some in the space, with the ease of process and reduced cost of collateralised reinsurance over a cat bond, for example, stimulating growth.


Catastrophes cost $520bn annually, can be reduced: World Bank


According to a new report from the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR), natural catastrophes push some 26 million people into poverty and cost a staggering $520 billion in losses, each year, underlining the importance of disaster risk finance and improved disaster resilience.

The report, which examines 117 countries, states that the impact that natural catastrophe events have on well-being each year, measured in terms of lost consumption, is greater than asset losses, and is actually equivalent to approximately $520 billion a year.

It’s yet another statistic that highlights the importance of integrating disaster risk financing and risk transfer, as well as insurance, reinsurance and capital markets capacity, into the disaster resilience plans of countries around the world.


ILS & Insurtech evolution brings role of broker into question: Speakers


As the convergence space continues to evolve and traditional and alternative reinsurance capital and structures become more integrated, along with the rise of technology in the sector, market leaders have questioned what this could mean for intermediaries and their role in the value chain.

Insurtech image from Insurance.meA panel of reinsurance and insurance-linked securities (ILS) industry experts speaking on a panel at the 2016 meeting of the reinsurance industry in Bermuda, sponsored by Standard & Poor’s (S&P) and PwC Bermuda, discussed the evolving role of the broker community in the convergence space.

Some industry observers and analysts have said that as much as 20% of the premium is lost in the distribution chain, explains S&P, and with reinsurers and ILS players increasingly searching for efficiency in a challenging environment, the role of intermediaries has come into focus.


Capital markets in reinsurance for the long haul, says JLTCM’s Popkin


The diversification offered and uncorrelation achieved in the insurance-linked securities (ILS) space, and its record of paying claims suggests the capital markets won’t be leaving the reinsurance industry anytime soon, according to Michael Popkin, Managing Director and Co-Head of ILS at JLT Capital Markets (JLTCM).

“Capital markets are here to stay,” says Popkin, explaining that a large number of reinsurance companies now utilise ILS capacity and features in some form or another, making it “increasingly difficult to tell what is a traditional reinsurer and what is a capital market fund.”

In a recent article on the JLT Re website, Popkin explores the future of the expanding and increasingly mature alternative capital space, in response to concerns and beliefs of some in the risk transfer world that the ILS space could come to an end when the softening landscape turns.


Pensions & sovereigns waiting for right time to upsize ILS allocations


Some of the larger pension funds and sovereign wealth funds that are already investing in insurance-linked securities (ILS) and other reinsurance linked investments are keen to increase their allocations to the space, but waiting for the right time.

A growing number of the world’s pension funds are already allocating to ILS and even more continue to investigate and research the space, educating themselves in order to understand the unique nature of insurance and reinsurance linked assets.

At the ILS Bermuda Convergence 2016 event held last week, representatives from three pension funds that already invest in the ILS asset class all explained that they are ready and willing to increase their allocations once attractive opportunities become available.

Eveline Takken-Somers, Investment Director responsible for the ILS allocation at Dutch pension fund manager PGGM, explained that they have been investing in ILS, starting with catastrophe bonds only, since 2006.


ILS suited for transfer of elemental cat risks & weather risks: JLTCM


Businesses across the globe should look to the capital markets in order to transfer basic catastrophe risks and weather risks off their balance sheets, for the benefit of both the cedent and the insurance-linked securities (ILS) space, according to ILS experts at JLT Capital Markets (JLTCM).

The ILS space continues to expand and deepen its relationship with insurance and reinsurance markets around the world, continuously looking to build on its geographical reach and product set for the benefit of cedents and the base of mature, and increasingly sophisticated capital markets investors.

The property catastrophe space remains highly competitive and as a result rates under significant pressure, prompting a need for alternative reinsurance capital to access new risks and new geographies if it’s going to achieve the kind of growth that’s been witnessed in recent times.