DEALING WITH DISASTER


Low levels of insurance penetration remain a problem in both emerging and developed economies. Intelligent Insurer investigates how insurance- linked securities or catastrophe bonds may provide a solution.


R


ecent events around the globe have demonstrated the vulnerability of human society to natural catastrophes. But while every part of the planet is susceptible to nature’s wrath, certain


countries are better able to cope with disasters than others in terms of the technology and infrastructure available to save both lives and livelihoods by getting economic recovery back on track as quickly as possible.


Generally speaking, the world’s most underdeveloped countries and


economies are the ones least able to cope with big natural catastrophes. A big reason for this is the lack of insurance in emerging economies at all levels. This means that both expertise and much-needed cash are not available in the aftermath of devastating events.


“Governments in emerging economies can have problems with accessing natural disaster insurance,” says Ivan Zelenko, head of derivatives and


structured finance in the capital markets department of the treasury at the World Bank.


“Statistics show that developed countries that are prone to disaster are,


in general, well insured, whereas the rate of insurance take-up is much lower in developing countries. So the problem is clear.”


But although the gap between developed and emerging economies is


stark, insurance coverage can be low even in some of the world’s most advanced nations. Nikhil da Victoria Lobo, vice president in the public sector unit of Swiss Re, says that only 47 percent of the losses stemming from Hurricane Katrina were insured. This is still high in comparison with the situation following the Chilean earthquake, however, where only about 25 percent of the losses were insured.


Summer 2011 | INTELLIGENT INSURER | 35


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