Insurers adopt cat management best practice
A combination of costly catastrophe in parts of the world previously regarded as low risk in recent years and greater regulatory oversight is forcing insurers and reinsurers globally to adopt financial catastrophe management best practices from around the world – and this includes insurers in Latin America.
That is the view of Tom Larsen, senior vice president and product architect at EQECAT. A combination of the ‘cold spot’ catastrophes of 2010 and 2011 and the regulatory overtures of ORSA & Solvency II combined with enterprise risk management (ERM) initiatives by ratings agencies are encouraging the adoption of financial catastrophe management best practices from around the world,” he said.
He said these trends are also leading to a greater reliance upon catastrophe models to allocate risk capital and measure returns on capital. “The influence of this trend is also driving an increase in the usage of catastrophe models for underwriting, pricing and aggregate risk management,” he said.
“Market cycles and the entry of alternative capital providers can influence the short-term costs of capital and thus the cost of providing superior products to the market and EQECAT’s models support,” he added.
He said that he sees a sustained and growing focus upon Latin America by global insurers and reinsurers. The biggest focus is on Brazil, Chile and Mexico, which have the largest economies in the region and are expected to be the greatest source of growth. “But many smaller countries are expected to grow significantly as well,” Larsen added.
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