“The first thing the Bermuda Market will do is pay”: KPMG
Bermuda is well placed to react to the needs of the market in the wake of hurricanes Harvey and Irma, according to KPMG.
“The first thing that the Bermuda Market will do is pay,” Mike Morrison, managing director of KPMG in Bermuda told Monte Carlo Today.
“That’s key. The catastrophe reinsurance market whether traditional or alternative is well regarded for paying quickly and that is really important, because demonstrating that reinsurance does respond and gets the money to the people who need it as quickly as possible, albeit through a distribution chain, is really important.
“The second piece of this is the opportunity, which has been demonstrated particularly with Harvey, to highlight the protection gap.”
Morrison pointed out that Harvey had resulted in a huge economic loss but a relatively small insurance loss, particularly with regard to flood damage. As a result, he said, there is an opportunity for the reinsurance market to demonstrate, through paying for the risks that have been written on those losses, that policymakers need to be aware that insurance needs to be more widely distributed by the private sector, and not the public sector.
He agreed that one way to begin to tackle the protection gap might be by working to narrow it at the very least.
“A good example of a protection gap is in a developing country such as Mexico, which has just experienced a significant earthquake which by some accounts has triggered a cat bond.
“Government agencies will likely be the recipients of those funds, which they will use to respond to that disaster. That’s a very good example of people seeing a quick result from insurance, which they need,” he said.
“There also needs to be education on why you should buy insurance, and why the purchase of insurance can be good for society as well as for individuals.”
Morrison stressed that the re/insurance market on Bermuda possesses many attributes that other locations do not have, namely a large and varied market that can be rapidly accessed, which possesses a range of re/insurance tools that cover most eventualities and which is well regulated, enabling the rapid creation of new firms should the need arise for additional re/insurers.
He also pointed out that a rapid response from Bermuda could allow life to start to return to normal for people in the Caribbean who have effectively lost everything they own.
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