MONTE CARLO, Monaco — Assuming catastrophe risk currently backed by government plans could be a source of growth for reinsurers, according to experts at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo, Monaco.
Flood risk, for example, is both an economic and political issue in virtually every country in the world, said David Priebe, vice chairman of Guy Carpenter & Co. L.L.C., at a briefing. “Many governments are trying to figure out how to manage that,” he said, and given current strained economic conditions in many countries, there is a drive on governments' part to transfer that risk to the private sector, he said.
The reinsurance industry, for its part, is now better able to model such risks than in the past, he added.
In many countries of the world, this represents a “great opportunity” for reinsurers to grow, said Dominic Christian, co-CEO of Aon Benfield, a unit of Aon P.L.C.
It does represent an area of opportunity for reinsurers, said Victor Peignet, CEO of Scor Global P&C, a unit of Paris-based Scor S.E.
“The reinsurance market has shown that it can take on natural catastrophe risk pretty well,” he said. “We see opportunities for public-private partnerships (for) risks that the free market can absorb,” he added.
Some governments probably do not truly understand the size of the natural catastrophe risk they hold, said Chris Schaper, president of Montpelier Reinsurance Ltd.
Developing economies, in particular, are in need of additional reinsurance capacity for catastrophe risks, he noted.
Montpelier Risk Institute launched
During the Rendez-Vous, Montpelier Re announced the launch of the Montpelier Risk Institute, a virtual institute aimed at using scientific and insurance expertise to find new ways to quantify risk.
“We can really do a lot as an industry” to fill coverage gaps in countries that face natural catastrophe risks, said Jean-Jacques Henchoz, CEO of reinsurance for the Europe, Middle East and Africa region for Swiss Re Ltd. “And we should, as an industry, push for sustainability,” he said.
“We collectively should feel pain every time there is a big gap between an insured loss and an economic loss, because that is us failing to do what we should do for society,” said Michael S. McGavick, CEO of XL Group P.L.C.
“We should be as much a part of the solution as we can be,” he said, and this provides very real opportunities for insurers and reinsurers to grow.
Luzi Hitz, CEO of Zurich-based Perils A.G., which provides industrywide natural catastrophe exposure and claims data, said that while it is likely that risks currently held by governments will be transferred to the private sector, he was “not sure when” that will start happening.
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