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.”

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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.

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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.

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World Bank fully supportive of direct sovereign risk transfer: Bennett

ARTEMIS: The efforts of the World Bank around disaster risk financing for its members continues to be a real benefit, and while the organisation can and will do more, this isn’t about being the dominant force in the market, according to Michael Bennett, Head of Derivatives & Structured Finance, World Bank Treasury.

During last month’s annual ILS conference in New York City, held virtually for the first time owing to restrictions, Artemis spoke with Bennett about the World Bank’s use of reinsurance and insurance-linked securities (ILS) structures for member governments, and how this might evolve in the future.

So far, the World Bank has transferred some $4.5 billion of risk to the markets, of which the large majority (65%) has been via ILS structures; showing how beneficial capital markets-backed protection has been for both the organisation and its members.

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Pacific Alliance hopes to expand cat bond to cover cyclones, floods, droughts

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The Pacific Alliance, a Latin American trade bloc made up of Chile, Colombia, Mexico and Peru, would like to expand on the coverage provided by their catastrophe bonds, with hydro-meteorological risks including tropical cyclones, drought, floods and even cold weather all mooted as potential perils to include.

The Ministries of Finance of the Pacific Alliance members met in late 2020 to discuss next steps in their disaster risk financing and catastrophe bond journey.

The Pacific Alliance trade bloc nations in Latin America currently benefit from a combined $1.36 billion of catastrophe bond backed earthquake insurance protection, in a landmark multi-country cat bond issuance brought to market in early 2018.

World Bank has ‘only scratched the surface’ on what it can do: Bennett, ILS NYC 2021

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The World Bank has “only scratched the surface” on what it can do with member governments that are looking to transfer some of their disaster risk to the reinsurance sector and the capital markets, according to Michael Bennett, Head of Derivatives & Structured Finance, World Bank Treasury.

The World Bank is an international organisation with 189 member governments. Through the use of both traditional reinsurance and the issuance of catastrophe bonds, a sub-sector of the insurance-linked securities (ILS) space, it helps its members transfer disaster risk to the markets.

The focus of the Treasury Department of the World Bank is often the tail-end of a broader engagement with a given member designed to assess and quantify their disaster risk.

World Bank supports Central Asia Multi-Peril Risk Assessment

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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.

One of the first steps in moving towards sovereign disaster risk transfer, such as use of insurance, reinsurance or catastrophe bond type arrangements, tends to be in the development of risk modelling tools to enhance the understanding of exposures in a country.

To that end, the World Bank, alongside its partners, has launched an initiative to provide a multi-peril risk assessment of natural disaster risks, including earthquakes, floods and selected landslides within the Central Asia region.

Indonesia cat bond possible, as World Bank lends for disaster insurance

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The World Bank has approved $500 million of funding for Indonesia to help the country enhance its financial response to natural disasters, climate risks, and health-related shocks, with the use of risk pooling, and insurance or reinsurance instruments at the heart of the plan.

Between 2014 and 2018, the central government of Indonesia has spent between US$90 million and US$500 million annually on disaster response and recovery, the World Bank explained, while Indonesia’s local governments spent an estimated additional $250 million over the same period.

With the cost of natural disasters and severe weather events expected to keep increasing further due to climate change and also urban growth, the World Bank notes that these costs will pressure Indonesia’s government public spending.

Tre Hapa për të Ndihmuar Shqipërinë për të Përballuar Ndikimet Financiare të Shkaktuara nga Fatkeqësitë dhe Krizat

PUBLIKIMI I PLOT ORIGJINAL KTU

Në vitin 2019, Shqipëria u përball me një seri tërmetesh, ndër të cilët edhe një me magnitudë të lartë; më pas, mes përpjekjeve për rindërtim në vitin 2020, u godit edhe nga pandemia COVID-19. E përballur me nevojat e shumta në rritje, mbështetja e qeverisë shqiptare shkoi për të varfërit dhe personat e prekur nga fatkeqësitë dhe krizat, përfshirë këtu edhe bizneset. Për ta realizuar këtë, ajo shfrytëzoi rezervat fiskale, rishpërndau buxhetet për përparësitë urgjente dhe u mbështet tek ndihma e jashtme. Shumë nga këto masa u ndërmorën në bazë të nevojës.

Në shtator 2020, Banka Botërore së bashku me Ministrinë e Financave dhe Ekonomisë,  kreu vlerësimin diagnostikues në lidhje me financimin e riskut të fatkeqësive në Shqipëri.[1] Kjo përpjekje kishte për qëllim identifikimin e mangësive të financimit të mekanizmave për gatishmërinë financiare të vendit në rast fatkeqësish dhe rekomandimin e mënyrave për përmirësimin e tyre.

Menaxhimi i riskut të fatkeqësive është ndër përparësitë kryesore të politikave në Republikën e Shqipërisë dhe, pak kohë para tërmetit, qeveria shqiptare kreu edhe një seri reformash në këtë drejtim, si për shembull: miratimi i Ligjit të ri për Mbrojtjen Civile, racionalizimi i kornizave institucionale, decentralizimi i funksioneve që aktivizohen pas fatkeqësive dhe vënia në dispozicion e strukturave të nevojshme për fondet e emergjencës në nivel vendor dhe në nivel ministrie të linjës.