13 // THE DISASTER GAP: HOW INSURERS AND THE CAPITAL MARKETS CAN HARNESS BIG DATA TO CLOSE THE GAP


WORKING WITH GOVERNMENTS


Assuming insurance penetration continues to grow in catastrophe-exposed regions of the world, there is a bright future for the traditional and non-traditional property catastrophe reinsurance market. Cat bonds are particularly well suited to governments and cat pools looking to transfer peak risk to the capital markets. As in Turkey, there are earthquake pools in Japan, California (US), New Zealand and Taiwan, each of which has tapped capital market capacity to some extent.


“For California quake (and we’re not talking about developing economies, we’re talking about California) the percentage of homeowners who have earthquake insurance is something like 10% to 12%, so there the capital markets have supported the California Earthquake Authority (CEA),” says Dubinsky. “And as the capital markets capacity becomes more available and attractively priced it really has the potential to reduce the cost for that pool and expand the coverage and penetration of insurance, and that is a good thing.”


The UK is in the process of launching Flood Re as a public/private backstop for properties that cannot find flood insurance in the private market. It also has a terrorism pool – Pool Re, the ARPC in Australia, GAREAT in France and TRIPRA in the US are all government-backed terrorism backstops.


The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is the first region-wide catastrophe pool, backed by the World Bank and several reinsurers and brokers. Other countries with cat pools include Iceland, Norway, Spain and Switzerland. In the US there are 30 fair access to insurance requirements (FAIR) plans and several beach and windstorm plans (such as the Texas Windstorm Insurance Association) in addition to two state insurers in Florida and Louisiana and a state reinsurer in Florida.


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