ART

"Microsoft Corp. has revealed that it was a buyer in the first transaction to use the innovative wind farm weather hedging revenue product created by Allianz Risk Transfer (ART) with the help of Nephila Capital."

"The African Risk Capacity (ARC), Africa’s sovereign parametric catastrophe insurance pool, is to make a US$8 million payout to Malawi after its 2015/16 agricultural season parametric drought insurance policy was triggered by ARC’s model."

The Microinsurance Catastrophe Risk Organisation (MiCRO), a Barbados based reinsurance company that leverages the capital efficiency of the international reinsurance market alongside donor capital, has launched a novel index-linked business interruption policy.

"It’s been reported that a number of countries in South America are looking to sponsor a catastrophe bond to protect against earthquake risks, with the help of reinsurance giant Swiss Re."

"Speedwell Weather, a provider of weather data, forecasting information, analytics, software and consultancy to the weather derivatives and weather risk management market, has unveiled its awaited parametric weather risk transfer platform weatherXchange. weatherXchange is an online technology based weather trading platform, that will enable protection buyers and sellers to meet and transact parametric or index based weather risk transfer contracts."

"Given the overall impact of catastrophes on public sector finances, governments in Latin America are transitioning from an over-reliance on post-event disaster financing to a pre-event approach to disaster risk mitigation and supporting a “building back better” concept. Societies are realizing that transferring risk to the private sector provides efficient and cost-effective solutions that relieve already strained public sector budgets."

"According to United Nations estimates, 54 percent of the world’s population lives in Eastern, Southern and Southeastern Asia. The region hosts 778 million urban inhabitants and seven out of the world’s top ten most populated cities. The region is also home to every major peril - from cyclone to tsunami - and has experienced some of the world’s largest catastrophes based on economic loss. While there are natural catastrophes all over the world, Asia is a unique confluence of people and perils."

"In 2015, Swiss Re’s Sigma report calculated that 27 terrorist events resulted in 1082 fatalities, but no insured losses. Unlike other lines of business, recent pricing and capacity trends have not been driven by a better technical understanding of the impact of losses that normally translates into improved peril understanding or advances in pricing or modeling techniques. This has generally inhibited the industry from expanding its product base for terrorism in line with the evolution of the peril, concentrating more on supporting the pools and the current established bounds of insurable loss."

"The (re)insurance industry should look towards closing the gap between economic and insured terror losses."

"A micro-insurance and index-insurance scheme has been launched at the World Economic Forum in Davos by Imperial academics who claim it will save the food supply chain billions of dollars per year and create large-scale demand for risk transfer to re/insurance."

"Proposed legislation in the U.S. state of Hawaii aims to establish a parametric disaster insurance pilot program to transfer its growing hurricane risk to the private insurance and reinsurance markets, which could include capital markets-backed capacity."

"GCube Underwriting Ltd. (GCube) has underlined the significant financial impact wind speed volatility can have on wind energy stakeholders throughout the world, highlighting the potential for insurance, reinsurance, and insurance-linked securities (ILS) players to capitalise on that sector’s billion-dollar opportunity."

"The UK’s Department for International Development (DFID) has underlined its commitment to improving and advancing economic development in the world’s poorest and most vulnerable countries, which includes the expansion of innovative climate and catastrophe risk insurance solutions from the private sector."

Exchange traded weather derivatives are still struggling to make headway across Europe, as demand for bourses’ contracts remains limited, suggesting a need for further sector education and innovation.

The World Bank’s Global Index Insurance Facility (GIIF) and African Reinsurance Corporation (Africa Re) have teamed up to provide a facility that will help to cap insurers loss ratios on weather index-insurance schemes in Africa.

"For sovereign governments, having a source of disaster risk financing and insurance provided by catastrophe bonds can help the government to borrow more on the capital markets, improve its standing with debtors and ultimately provide welfare gains to the population, according to a study."

An index-based livestock insurance program in Kenya, which was launched with the backing of the World Bank and with reinsurance from Swiss Re, has been triggered and will pay out $2 million to farmers hit by drought.

The 21 member economies of the Asia-Pacific Economic Cooperation (APEC) are once again meeting this week and disaster risk financing, insurance and reinsurance are hot on the agenda, as leaders in the region recognise the importance of increasing protection.

"Policymakers and economists have been looking for ways to make it easier to manage increasing debt burdens. This column assesses one possible solution: GDP-linked bonds that tie the size of debt payments to an economy’s wellbeing. There are clear benefits to a government from issuing GDP-linked bonds, but establishing investor confidence in these instruments will require a better approach to the obstacles posed by data revisions and changes in methodology."

Interest in nominal GDP-indexed bonds has grown in the context of the debate on how to prevent future sovereign debt crises. This column uses simulations up to 2040 to identify which countries would benefit from using such bonds instead of conventional debt. By issuing GDP-indexed bonds, these countries would protect their debt ratios against deflation and recession, and investors could benefit from the catching-up of emerging economies, could partially hedge their currency risk, and could diversify their portfolio compared to equity. The contribution of GDP-indexed bonds to international financial stability would justify international coordination to promote their use.

"The African Risk Capacity (ARC) and the African Development Bank (AfDB) are to collaborate to enhance Member states’ understanding of the need for and value of disaster insurance and ultimately to help expand and embed risk transfer within countries policy and development objectives."

"Weather risk management, risk transfer, data, pricing, broking and structuring firm Meteo Protect, has launched a new corporate headquarters in Paris to facilitate broad expansion plans across the globe."

The Pacific Alliance, a Latin American trade bloc, has again been discussing issuance of a joint catastrophe bond at a recent trade meeting in the region, and progress is being made with the help of the World Bank.

According to a report from Reuters, the Mexican government is planning to sponsor another catastrophe bond and is currently seeking bids from companies that can help to facilitate the issuance of a three-year cat bond covering hurricane and earthquake risks.

The Philippines has long been the focus of disaster risk financing and insurance discussions, given its exposure to typhoons, earthquakes, fires, rainfall, floods and drought, and now the Asian Development Bank (ADB) is examining options for disaster insurance facilities.

The Stock Exchange of Thailand (SET) is assessing launching weather futures and perhaps other weather derivatives in order to provide weather risk management tools in an exchange traded environment for farmers.

Damage from natural catastrophe losses as a proportion of GDP tends to be much higher than in developed economies (see tables 1 and 2). If the LAC region is to build on the economic and social gains of recent years, its governments must align with the private sector through public–private partnerships to improve risk management and disaster preparedness strategies.

"A new, regional disaster risk financing project that supports and builds on the experience of the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) has been launched in Fiji, significantly expanding regional collaboration and financial resilience."

"The World Bank is working with the Jamaican government and general insurance companies to develop an adequate and effective disaster risk financing strategy in the region, amidst concerns CCRIF SPC coverage is not sufficient alone to support the country in the face of major losses."