Reinsurance News

Re/insurance saves up to four times its equivalent in emergency response: UN

24th January 2017 - Author: Staff Writer

Re/insurance has proven to save as much as four times its equivalent in traditional disaster response, according to a report by the UN Under-Secretary-General for Humanitarian affairs and Chair of Insurance Development Forum, Stephen O’Brien, and the Executive Deputy Chairman XL Group and Chair of Insurance Development Forum, Stephen Catlin.

Data from a climate-risk insurance mechanism, the African Risk Capacity (ARC), has shown that each dollar spent on the mechanism is equivalent to US$4 in traditional emergency assistance costs.

The UN report draws on experience from multiple schemes by the World Bank, G20, and others; the study reports that a 1% increase in insurance penetration can reduce the disaster recovery burden on taxpayers by 22%.

The schemes examined ranged from national hazard-insurance from the Pacific Islands to Turkey, to regional schemes, and included the Pacific Catastrophe Risk Assessment and Financing Initiative, ARC, and the Caribbean and Central American Catastrophe Risk Insurance Facility.

Reports from ARC have shown that insurance and reinsurance can halve the funds needed when risk is pooled among nations and managed as a group.

Tremor - The modern way to place reinsurance

The speed of re/insurance payouts also make it the most efficient form of disaster relief, minimising knock-on effects of a natural disaster as impact is most effective when payouts are received within 14 days of a trigger.

This is why parametric triggers have proved so effective for insurance and reinsurance schemes designed to assist sovereigns, cities and corporations with capital after disaster strikes to enable better recovery.

ARC aims to extend its reach to 30 African countries and 150 million people by 2020.

The UN report demonstrates the extent to which development gains are protected when people’s assets and livelihoods are insured, and governments make considerable savings in  large-scale reconstruction and recovery, but on a global scale, 70% of economic losses from natural catastrophes are uninsured and this often rises to above 90%  in low – and middle-income countries.

To close this protection gap, the insurance industry and humanitarian and development sectors have formed the Insurance Development Forum (IDF), with the aim of improving global resilience by leveraging the expertise of the re/insurance sector to work towards the G7’s goal of extending risk insurance to an additional 400 million people in developing countries by 2020.

Print Friendly, PDF & Email

Recent Reinsurance News