Canadian Underwriter
News

Guy Carpenter report examines new approaches to risk financing


October 29, 2015   by Canadian Underwriter


Print this page Share

The creation of private sector pre-financing options will migrate management of catastrophes to insurance and reinsurance companies, where claims handling and risk management are at the core of their operations, according to a new public sector risk report from Guy Carpenter.

Released on Thursday, the report, titled Partnerships: The way to public sector risk financing, examines the shifting economic and risk landscapes that are driving public sector entities to consider new approaches to risk financing. The report explores the increasing ability of the private sector to assume public sector risk and the important role technology plays to help stakeholders identify, evaluate and finance risk. [click image below to enlarge]

The report examines the shifting economic and risk landscapes that are driving public sector entities to consider new approaches to risk financing

It also examines risk transfer solutions and mechanisms for terrorism risks, government and private sector initiatives for flood and United States residual market facilities as significant providers of some of the most wind- and earthquake-exposed property insurance in the U.S.

“The impact that catastrophic loss can have on the fiscal position and tax base of government entities across the globe is significant,” said Britt Newhouse, chairman of Guy Carpenter. “Heads of government, international trade organizations and private-sector risk bearers are seeking to re-examine roles and responsibilities through which societies can better manage these complicated risks,” Guy Carpenter added in a statement.

According to the report, approximately 73%, or US$2.7 trillion, of natural catastrophe losses globally between 1970 and 2014 were uninsured. Difficulties in securing affordable insurance for “remote” risks, such as earthquake or tropical cyclone, have led individuals to forgo coverage.

As governments across the globe examine new methods to manage and transfer this risk to the private sector, there are many developments underway to support this changing paradigm. Public-private-partnerships (PPPs), for example, have been established for greater economic security. In addition, an increase in capital entering the (re)insurance market and advancements in improving the measurability of risk have led to the introduction of other innovative risk transfer solutions, Guy Carpenter said.

“We have seen significant growth in public sector entities transferring risk to the reinsurance market via traditional risk transfer structures, collateralized reinsurance and catastrophe bonds,” said Jonathan Clark, managing director and North America head of Guy Carpenter’s Public Sector Specialty Practice, in the statement. “Reinsurance capacity has been instrumental in providing both savings to public sector entities in years with outsized loss activity as well as protections for loss reserve funds/surplus.”

“Many (re)insurance leaders believe the industry can play a significant role in a rapidly changing global risk landscape with pre-loss financing solutions designed to spread risk, relieve the burden on public finances and improve the resiliency of communities,” the report concluded.


Print this page Share

Have your say:

Your email address will not be published. Required fields are marked *

*