The World Bank has approved a $2.5m grant to the government of the Marshall Islands, providing funding for five more years of premiums for disaster risk insurance under the Pacific Catastrophe Risk Assessment and Finance Initiative (PCRAFI), a regional, market-based parametric catastrophe risk insurance pool that provides immediate funds in the event of a major natural disaster. The Marshall Islands are exposed to a variety of natural hazards, including prolonged and repeated droughts, flooding from king tides, and storms and cyclones.
Hurricane Rosa, a Category 4 hurricane currently charging towards the Pacific coast of Mexico, is too weak to trigger the class C layer of the 2017 Mexican cat bond deal at this moment in time. If the storm remains at or above its current pressure level then it will be too weak to trigger the class C layer of Mexico's 2017 Multicat cat bond, issued on behalf of the country’s catastrophe insurance scheme by the World Bank.
The World Bank’s Pacific Alliance cat bond and more recent FEMA-sponsored FloodSmart Re issuance are good examples of new perils and sponsors coming into the market and more is to come, according to Paul Schultz, CEO of Aon Securities. He said the market’s ability to come up with risk transfer solutions for governments and public sector entities in catastrophe-exposed regions would help to close the protection gap and thought new ILS centres, such as Singapore and the UK, could help to broaden the market over time.
Extreme weather-related events made 2017 one of the most costly on record for the global insurance industry, but insurers’ capacity to meet their losses continues to grow, according to Aon. At $353 billion, inflation-adjusted economic losses in 2017 were the second highest on record, after 2011 ($486 billion). Atlantic hurricanes were the most significant cause ($220 billion), along with flooding in China, wildfires in California and the Southern European drought. Insured losses reached $134 billion, second only to 2011. Against those losses, global insurer capital grew to $4.5 trillion in the first half of 2017.
RMS has estimated that the insured loss for Hurricane Florence will be between $$2.8 billion and $$5 billion. This estimate represents insured losses associated with wind, storm surge, and inland flood damage across North Carolina, South Carolina, and Virginia, including losses to the National Flood Insurance Program (NFIP). RMS expects losses to the NFIP to reach between $800 million and $1.2 billion.
Risk Management Solutions
Meanwhile, AIR Worldwide estimates that industry insured losses from Typhoon Mangkhut in mainland China, Hong Kong, and Macau will be between $1 billion and $2 billion. Dr Peter Sousounis, vice president and director of meteorology, AIR Worldwide, said: "The centre of the typhoon passed 130 km west of Hong Kong and 70 km west of Macau, both of which felts its effects due to a massive wind field; hurricane-force winds extended 160 km from its centre. Storm surge was as high as 3.38 meters in Tai Po Kau, Hong Kong.”
Posted: Monday, October 1st, 2018