Resilience in the Nation s Capital

Transcription

1 Resilience in the Nation s Capital Reinsurers, mitigation and best resilience practices Stephen H. Weinstein Senior Vice President & General Counsel, RenaissanceRe Chairman, RenaissanceRe Risk Sciences Foundation March 14, May, 2012

2 RenaissanceRe A Leader in Risk Management A leading global catastrophe reinsurer, established in 1993 Highly rated for financial strength: AA- from S&P, and A+ from A.M. Best Excellent Enterprise Risk Management rating from S&P - one of the first and few with this distinction Winner of Reactions Magazine 2012 Global awards for Best Reinsurance Company Overall, Best Global Reinsurance Company for Property award from Reactions Magazine, 2009, 2010, 2011 and 2012 Proud 20-year history of paying claims: Paid approximately $3.6 billion in claims related to major events from Paid over $500 million in claims related to Hurricanes Katrina, Rita and Wilma Claims payments and science following Hurricane Sandy Provider of flood coverage in the global market * 2

3 Reinsurance: Insurance for Insurance Companies Why do you buy insurance? Protection for catastrophic loss to your family: Why does your insurer buy reinsurance? Protection for catastrophic losses to an insurer: Share your risk with others insured by a primary insurance company good diversification Spread catastrophic risks with others around the world very significant diversification 3

4 Reinsurers are Incented to Help Mitigate Climate Risks that are reinsured. 4

5 RenaissanceRe Committed to Mitigation WeatherPredict s advanced scientists provide atmospheric perils intelligence Sponsor of Risk Mitigation Leadership Forums National Partner with FLASH and IBHS RenaissanceRe Wall of Wind at FIU StormStruck at Walt Disney World s EPCOT IBHS Research Center founding sponsor 5

6 Supporting Science and Practical Research 6

7 RenaissanceRe and Climate Change We believe, and believe the consensus view of current scientific studies substantiates, that change in climate conditions, primarily global temperatures and expected sea levels, are likely to increase the severity and possibly the frequency of natural catastrophes relative to the historical experience over the past 100 years. 7

8 Remove the Clouds that Mask the Need to Adapt 8

9 Impairments to Adaptation and Wise Land Use The U.S. Government Accountability Office (GAO) has found: On NFIP: By design, NFIP is not an actuarially sound program eliminating or reducing [NFIP s] subsidies would help ensure that premium rates more accurately reflected the actual risk of loss and could encourage mitigation efforts On State Reinsurance Funds: [Because of Florida Hurricane Catastrophe Fund subsidies] homeowners may not be paying premiums that fully reflect the risk of loss and may be more likely to forego mitigation efforts. On Federal Cat Funds or Backstops : unless [a] federal [backstop] program charged premiums that fully reflect the risk of loss, it could inadvertently encourage further development and population growth in areas with high natural catastrophe risk. 9

10 Consider Adopting the PACE Approach Steps in land-secured financing The local government approves financing of improvements with a defined public interest. The costs for the improvements are identified and the government issues bonds to pay up-front costs. A tax lien is placed on properties that receive benefits from the improvements. The lien secures the assessment levied on benefitted properties through the owner s property tax bill and the assessment repays the bond investors. Steps in PACE A city or county creates a type of land-secured financing district or a similar mechanism. On a voluntary basis, property owners signup for financing to make mitigation improvements. The proceeds from bond revenues or other financing is provided to property owners to pay for mitigation improvements. The property owners pay back the city or county through an assessment on their property tax bills for up to 20 years. Consistent with existing land-secured financing, which towns and cities across the U.S. have used for over 100 years to pay for improvements in the public interest. 25 states currently use the PACE model 10

11 Property Assessed Mitigation Improvement (PAMI) Mitigation improvements funded through an on-going assessment on property tax bills PAMI would not require up-front capital for mitigation improvements Mitigation investments transfer to the next owner as part of the property s annual tax bill The repayment obligation would be attached to the property Debt would typically be secured by a senior lien on the property, which would help attract private capital at competitive rates and terms PAMI would be 100% voluntary 11

12 Evaluate the Benefits of Green Infrastructure Monetary value of U.S. wetlands from the standpoint of hurricane protection alone: $23.3 billion per year Costanza et al, 2008 salt marshes have value for coastal hazard mitigation and climate change adaptation 12

13 Partnering with the Disaster Safety Community 13

14 Special Challenges for Americans of Lesser Means 14

15 Enhanced Engagement and Outreach 15

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17 Working Together 17

18 You re Invited 18

19 Encouraging Consumer Adaptation Now 19

20 Adaptation and Mitigation Measures: My Incentives The number one focus of public policy should be reducing risk to human life. - Hurricane Risk Mitigation Leadership Forum Key Principles 20

21 Renaissance House 12 Crow Lane Pembroke HM19 Bermuda 21