New capital will participate on perils
The new wave of so-called convergence capital that has entered in the industry in recent years will increasingly find ways to participate on risks in emerging markets and on non-peak perils driven by an improvement in the risk modelling capabilities available and a growing desire by governments to work with the private sector to offset risks.
That is the view of Paul Little, president of risk modelling business EQECAT. Little took the reins of the company in March 2013 after joining it in 2010. He was previously a reinsurance broker specialising in catastrophe risks.
“As many of these emerging economies continue to grow quickly we as an industry can increasingly develop really good exposure data and start to use that to build more robust models. Ultimately, these can then be used to transfer risk in a variety of ways and one of these will be into the capital markets,” Little said.
He admits that in some parts of the world there is still a lot of work to be done around risk data and that collaboration between economists, scientists and risk modellers is critical. But he also anticipates an expansion of the reach of alternative capital in the near future, partly driven by a desire by governments to work with the private sector to transfer risk.
New Zealand and Taiwan are two examples where this public-private model could come to fruition in the near future, Little said, but he also cites the example of the Caribbean Catastrophe Risk Insurance Facility as having this potential and notes that even in the US moves are well underway to transfer flood risk back into the private sector.
Against this backdrop of capital market investors increasingly moving into a wider range of risk globally, he wants EQECAT’s risk modelling capabilities to become the benchmark for the industry. “With 180 country peril models, we offer a truly global platform for our clients,” he said. “We want to become the reference point for global players.”
