As the California property market experiences a dynamic and challenging time, it faces an escalating risk of wildfires, a peril that needs multiple perspectives in order to understand it, experts stated during Guy Carpenter’s recent California Summit event.
During the event it was also noted that while reinsurance appetite has increased through the mid-year renewals, investor appetite in the insurance linked securities (ILS) space for perils such as wildfire is measured.
In his opening remarks, Chairman David Priebe stated: “It’s a dynamic and challenging time for the California property market. Guy Carpenter is excited to be leading the conversation with insurance carriers, capital providers and regulators to foster collaboration between parties, as we all work toward the goal of bringing sustainable capacity to residents and businesses in California while allowing capital providers to earn a fair return.”
Kimberly Roberts, Head of North America Peril Advisory, highlighted the complicated interplay between humans and the natural environment that is contributing to the escalation of wildfire risk, which is also occurring on the backdrop of a warming climate.
Mark Hope Senior Vice President, North America Peril Advisory, commented: “A peril as complex as wildfire requires multiple perspectives provided from multiple data sources and tools in order to build confidence and clarity in our understanding of risk.”
Managing Director Cronin noted that, through the mid-year renewals, Guy Carpenter has seen an increase in reinsurer appetite, improved buying conditions and adequate capacity to meet increased demand.
Talking about investor appetite in the ILS space in wildfire-exposed transactions, Hochberg, Head of Global Risk Solutions, noted that maturity and consensus around the modelling is needed to increase interest.
He said: “Historically, the ILS market has been dominated by critical US catastrophe perils (US wind and US quake); however, we believe that there is measured investor appetite in the ILS space for perils such as wildfire.
“It will take some additional maturity and consensus around the modelling for the peril in order to increase investor confidence and to create a more liquid market in wildfire-exposed transactions.”
During the event, Guillermo Franco Managing Director, Global Head of Catastrophe Risk Research, commented that parametric solutions continue to grow and evolve. Noting that they are a tool that complements and enhances indemnity coverages, providing fast and versatile payouts after wildfire events.
Kelli Cronin, Managing Director, Treaty Broking, North America, highlighted that “industry collaboration and knowledge sharing is critical to evolving our understanding of wildfire risk and increasing investor appetite for the peril.”
James Mitchell, Consultant, agreed with Cronin, stating: “It is essential that the industry collaborates to build sustainable risk solutions for complex perils such as wildfire. Leveraging recent and significant technical innovation, serves to deepen our ability to evaluate the risk and attract consistent partnership capital.”
