World Bank climate change plan highlights cat bonds & risk transfer

This week, the World Bank Group announced its new Climate Change Action Plan, with a range of commitments to ramp up and deliver record levels of climate finance, while catastrophe bonds, disaster risk financing and insurance against climate risk are also mentioned

Through its new Climate Change Action Plan, the World Bank is targeting the delivery of record levels of climate financing to developing countries.

At the same time the World Bank aims to work to reduce emissions, strengthen adaptation and align financial flows within the work it does with the goals of the Paris Agreement on climate change.

FULL ORIGINAL PUBLICATION HERE

Global insurance protection gap hit $1.4 trillion high in 2020: Swiss Re

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.

Swiss Re Institute has published its Resilience Index, which shows that the COVID-19 pandemic reduced global macroeconomic resilience by close to a fifth in 2020.

Global economic growth is expected to recover strongly in 2021, after the pandemic-induced recession in 2020, thee reinsurance firm said, which it expects will help to build macroeconomic resilience again.

However, Swiss Re warns that “there will not be a return to pre-COVID-19 levels of resilience in 2021.”

FULL ORIGINAL PUBLICATION HERE

Hong Kong ILS enquiries already received from potential sponsors

It increasingly looks like Hong Kong could break into the insurance-linked securities (ILS) market before too much longer, as with details of its ILS grant pilot now available, one local law firm said it is already receiving enquiries from potential sponsors.

Back in February, Paul Chan, the Financial Secretary of Hong Kong, revealed plans for a Pilot Insurance‑linked Securities Grant Scheme that will pay as much as HK $12 million per issuance, which is close to US $1.6 million of potential ILS or catastrophe bond issuance cost savings for sponsors choosing to use Hong Kong as a domicile.

Then, in May this year, Hong Kong’s Insurance Authority (IA) published initial details of the insurance-linked securities (ILS) grant scheme.

FULL ORIGINAL PUBLICATION HERE

Global insurance protection gap hit $1.4 trillion high in 2020: Swiss Re

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.

Swiss Re Institute has published its Resilience Index, which shows that the COVID-19 pandemic reduced global macroeconomic resilience by close to a fifth in 2020.

Global economic growth is expected to recover strongly in 2021, after the pandemic-induced recession in 2020, thee reinsurance firm said, which it expects will help to build macroeconomic resilience again.

FULL ORIGINAL PUBLICATION HERE

The only asset class that helps people rebuild after natural disasters

A core reason that insurance-linked securities (ILS), such as catastrophe bonds and other reinsurance linked investments, are considered as socially responsible investments by many allocators is the fact they deploy their capital into natural disaster recovery and rebuilding.

While ESG, environment, social and governance factors, are now seen as becoming critical for insurance-linked securities (ILS) strategies future popularity, the truth is that at least the S (social) aspect of ESG has been firmly embedded in the majority of ILS right from the start.

We first wrote about the importance of ESG for the catastrophe bond and broader ILS market back in 2009, when for the first time we learned of a pension fund citing ESG as an important criteria for its consideration of investing in a cat bond fund.

FULL ORIGINAL PUBLICATION HERE

More & better “catastrophe-triggered” instruments needed: UN Sec-Gen Guterres

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.

Speaking today at the Insurance Development Forum’s (IDF) Summit 2021, UN Secretary General Guterres explained the important roles of the insurance sector (within which we’d include reinsurance and insurance-linked securities (ILS) of course) in adapting to a rapidly changing climate and the race to transition to net zero emissions by 2050.

With more than $35 trillion dollars of assets under management in the global insurance and reinsurance industry, Guterres said, “I encourage the insurance industry to align its portfolios and investments with net zero by 2050.

FULL ORIGINAL PUBLICATION HERE

Bill reintroduced calling for more NFIP flood reinsurance & cat bonds

A bill has been reintroduced to the United States Congress that again calls on lawmakers to codify that Federal Emergency Management Agency (FEMA), as the administrator of the U.S. National Flood Insurance Program (NFIP), sets a PML target each year and buys reinsurance and capital market risk transfer solutions accordingly.

The Taxpayer Exposure Mitigation Act is one of four bills reintroduced by Congressman Rep. Blaine Luetkemeyer of Missouri and focuses solely on mandating use of risk capital to support the NFIP’s financing needs, de-risk it and enable it to pay its claims.

Efforts to enshrine in law a requirement for the NFIP to be de-risked with the help of the private reinsurance and capital markets have been underway some years, but so far these efforts have failed to gain the necessary support, or have been sidelined as other legislative issues took precedence.

FULL ORIGINAL PUBLICATION HERE

TWIA to double Alamo Re 2021 cat bond to $500m

The Texas Windstorm Insurance Association (TWIA) is now expected to double in size its new Alamo Re Ltd. (Series 2021-1) catastrophe bond transaction, which will now more than replace a soon to mature $400 million cat bond from 2018.

As we were first to report this week, TWIA’s staff said at a meeting on Wednesday that the new cat bond could be upsized, depending on the investor reception to the deal and resulting market pricing.

TWIA returned to the catastrophe bond market for this new Alamo Re 2021 catastrophe bond just over one week ago, at which time it was seeking just $250 million of reinsurance with the issuance.

FULL ORIGINAL PUBLICATION HERE

Credit Suisse: Cushioning the impact of climate change with cat bonds.

More powerful hurricanes and increasing numbers of earthquakes – climate change is real. What does climate change mean for the alignment of investment portfolios? Investments in cat bonds offer institutional investors interesting opportunities to help shape the future.

Climate change is jeopardizing the creditworthiness of government bonds

“Over the past three decades, there has not been a single year when the average temperature in Switzerland was less than the average,” says Prof. David N. Bresch, Professor for Weather and Climate Risks at the Swiss Federal Institute of Technology Zurich, at Credit Suisse’s EAM thought leadership event. He is drawing attention here to ongoing climate change and the fact that the greenhouse effect needs to be limited to a considerable extent if the goal of the Paris Agreement on climate change to restrict global warming to well below two degrees by 2050 is to be achieved.

Because every degree of temperature rise leads to a 7% increase in humidity. As a result, there is a greater probability of tropical cyclones and hurricanes. An increased probability of natural disasters can in turn impact the creditworthiness of government bonds if national budgets face the additional burden of major loss events. “Countries in exposed regions must practice good risk management in order to secure their creditworthiness in the long term,” says Prof. Bresch.

FULL ORIGINAL PUBLICATION HERE

TWIA returns for $250m+ Alamo Re cat bond renewal for 2021

The Texas Windstorm Insurance Association (TWIA) has returned to the catastrophe bond market with a $250 million or larger Alamo Re Ltd. (Series 2021-1) transaction, which will go at least some of the way to renewing a soon to mature $400 million cat bond from 2018.

For 2021, the Texas Windstorm Insurance Association (TWIA)  has returned to Bermuda as the home for this catastrophe bond issuance, having ventured to Singapore for its only cat bond of 2020.

The residual market property insurer for the State of Texas has now sponsored six catastrophe bonds, with this 2021 Alamo Re issuance set to be the firms seventh.

In total, the six previously sponsored cat bonds have provided TWIA with $2.5 billion of fully-collateralized reinsurance from the capital markets.

FULL ORIGINAL PUBLICATION HERE