28 August 2014 News

Reinsurers can help build governments’ resilience

Reinsurers can play a role in building governments’ resilience to the financial shocks associated with natural catastrophes.

This is the finding of rating agency Standard & Poor’s which highlights that rising losses in the wake of natural catastrophes are increasing economic instability in many developing economies, and emerging economies are even more vulnerable.

The rating agency said that reinsurers can work together with governments to build disaster resilience before the event which will provide timely relief, recovery and reconstruction funding, and more broadly, protect economic stability.

It also advised that working with governments could open new doors for reinsurers. It explained that that the successful development of this market might be key to entrenching the revelance of insurance in high-growth markets.

“Ultimately, developing a market for these products will help reinsurers reinforce their relevance to new clients and new risks should lead to a stronger insurance market and increased insurance penetration (measured as insurance premium as a percentage of GDP),” said the rating agency.

“We consider that the reinsurance industry has a long-term and important role to play in developing awareness and acceptance of insurance-backed solutions for states' catastrophe exposure. In our view, taking on this role will provide diversification of risk exposure, help to educate and develop new insurance markets that can provide growth potential for years to come, and ultimately reinforce reinsurers' relevance to a new set of potential clients,” said S&P.

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