Canadian Underwriter
News

Swiss Re advocates public-private partnerships to ease financial burden of disaster relief


January 28, 2011   by Canadian Underwriter


Print this page Share

Swiss Re is advocating public-private partnerships between insurers and governments to help ease the financial burden of natural disasters on government budgets.
The reinsurer notes the economic costs of natural catastrophes have risen from an average US$25 billion per annum in the 1980s to US$130 billion in the 2000s. Given the reality of climate change, catastrophic events such as hurricanes, floods and droughts are likely to increase.
“The increasing severity and frequency of natural catastrophes are driving up the cost of disaster relief, especially in developing and emerging markets as they are hurt the most and prepared the least,” Swiss Re notes in an online post.
“When Hurricane Ivan struck Grenada in 2004, the economic losses amounted to US$889 million, a staggering 203% of the Caribbean island state’s gross domestic product (GDP). One year later, the country defaulted on its foreign debt.
“In the case of the more recent Haiti earthquake, the losses still stood at 114% of GDP.”
The mounting exposure to catastrophes calls for a more diversified approach to financing disaster relief, including the establishment of a functioning insurance market in some areas, says Michel Liès, chairman of global partnerships at Swiss Re.
“As a first priority, governments should ensure a functioning insurance market through appropriate legislation,” he said. “This will help to absorb a big part of disaster losses suffered by individuals and businesses.”
Second, Liès said, governments should consider pre-event financing solutions that build up reserves, as well as contingent finance and sovereign insurance solutions.
“Post-disaster financing of relief, rehabilitation and reconstruction through budgetary means, debt financing or donor aid should only come into play to cover residual losses, once all other risk transfer solutions have been exhausted,” said Liès.


Print this page Share

Have your say:

Your email address will not be published.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

*