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2018 DRR Financing 3.3 Natalie Kraus


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DRR Financing Workshop: Insurance Markets, Private Sector Opportunities

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2018 DRR Financing 3.3 Natalie Kraus

  1. 1. DRR Financing Workshop Insurance Markets, Private Sector Opportunities Istanbul, 4th October 2018 Image: used under license from
  2. 2. NatCat-Insurances Examples of sovereign and public-private NatCat risk transfer schemes African nations African Risk Capacity (ARC) Algeria Catastrophe Insurance Pool Caribbean Catastrophe Risk Insurance Facility (CCRIF) New Zealand Earthquake Commission (EQC) Norway Norsk Naturskadepool (NNPP) Turkey Catastrophe Insurance Pool (TCIP) United Kingdom Flood Re St. Lucia, Grenada, Jamaica Livelihood Protection Policy (LPP) Iceland Icelandic Catastrophe Insurance (ICI) Pacific Islands Pacific Catastrophe Risk Insurance Company (PCRIC) Philippines Sovereign Parametric Insurance (PSPI) United States National Flood Insurance Program (NFIP) Mexico Fondo Nacional de Desastres Naturales (FONDEN) Switzerland Swiss Natural Perils Pool (ES-Pool) Intercantonal Union of Reinsurance (IRV) Romania Programul Roman de Asigurare la Catastrofe (PAID) Taiwan Residential Earthquake Insurance Pool (TREIF) Indonesian Catastrophe Reinsurance Pool (Maipark) 2 StormEQFlood Drought
  3. 3. 3 NatCat-Insurances a dramatic risk protection gap: insured vs. uninsured NatCat losses in 2017 continent overall losses US$ bn insured losses US$ bn North America 279 125 South America 4.4 0.54 Europe 16 5 Africa 2.3 0.35 Asia 32 2.9 Australia & Oceania 4 2.3 31% 9% 15% 58% 12% inflation-adjusted via country-specific consumer price index and consideration of exchange-rate fluctuations between local currency and US$ Uninsured loss share Insured loss share losses per continent as percentage of overall losses © 2018 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As of June 2018 Source: Munich Re, NatCatSERVICE, 2018 44% 56% 88% 85% 91% 42% 69%
  4. 4. Challenge – identifying the value proposition of risk transfer 4 Timing Allocation Ex ante Financing: ▪ Interest payments Ex-Post Financing: ▪ Volatility in timing & amount ▪ Interest payments Constraint Risk transfer can disburse funds in case of insufficient funds for an emergency situation Risk transfer can disburse funds more rapidly than other sources of funding Risk transfer can free up capital for prevention, preparedness & resilience building activities Reserves/Budget Reallocation ▪ Opportunity Costs AlternativesEconomic Effect The risk transfer mechanism must address a constraint to add value The risk transfer mechanism must be cost efficient The risk transfer mechanism must contribute to longer term cost reduction Budgetary Support Crisis Mitigation Resilience Building Volume
  5. 5. Our Vision: Offer the right solution for your needs Cat Bond vs traditional parametric insurance 5 Re/InsuranceCat Bond Depending on return period and spread Large Capacities available Parametric Cover Capacity Qualifies also for smaller capacities Strongly dependent on underlying portfolio Every peril a vendor model is availablePerils Every peril you can create a trigger for: Earthquake, wind, flood, rainfall, …. For natural catastrophes almost all perils 3-4 yrsTerm 1 to 5 years 1-3 years • No reinstatement • Independent capacity Additional Aspects • Quick liquidity • Decent trigger to be developed • Claims settlement ▪ Munich Re has a long standing experience with these covers all over the world ▪ We have the capability to cover also non nat cat perils, e.g. cyber and pandemic risks ▪ Let’s get in touch and discuss what solution works best for you
  6. 6. Your Contacts Disclaimer Munich Re Group is not a legal, tax or accounting advisor and makes no representations as to the accuracy of any data or information gathered or prepared by Munich Re Group or advisors hereunder. Your company should therefore consult with its own tax, legal or other advisors and make its own independent analysis and investigation of the proposed transaction, as well as the financial, legal, accounting and tax consequences thereof, the creditworthiness of the parties involved and all other matters to the transaction prior to its own independent decision whether or not to enter into any agreements in connection with the transaction. This analysis and proposal contains indicative terms for discussion purposes only. Munich Re Group gives no assurance that any transaction will be consummated on the basis of these indicative terms and no specific issuer is obliged to issue any security or instrument on such indicative terms. This presentation does not constitute an offer to sell or any solicitation of any offer to buy or sell any security or instrument or to enter into any transaction on such indicative terms. The data and analysis does not assure that securities can be issued at certain terms and conditions. All terms and conditions are subject to a mutually agreed engagement letter. This presentation is not intended to provide the sole basis for any evaluation by you of a transaction, security or instrument and you agree that the merits or suitability of any such transaction, security or instrument to your particular situation will be independently determined by you including consideration of the legal, tax accounting, regulatory, financial and other related aspects thereof. In particular, Munich Re Group owes no duty to you to exercise any judgement on your behalf as to the merits or suitability of any transaction, security or instrument. The information contained herein is provided to you on a strictly confidential basis and you agree that it may not be copied, reproduced or otherwise distributed by you (other than to your professional advisors) without prior written consent. Michael Roth Senior Consultant +49 89 3891 9925 Natalie Kraus Senior Origination Manager +49 89 3891 9497 Rebecca Cichon Senior Origination Manager +41 58 22 66 415