GC Micro Risk Solutions SM Catastrophe Risk and the Importance of Microreinsurance

Transcription

1 April 17, 2011 GC Micro Risk Solutions SM Catastrophe Risk and the Importance of Microreinsurance Reed Bouchelle, Vice President, Asia Pacific

2 Catastrophe Risk and the Importance of Microreinsurance Presentation Outline About and GC Micro Risk Solutions SM (GC Micro) The Importance of Microreinsurance GC Micro Case Studies 1

3 & Company GC Micro Risk Solutions

4 Marsh & McLennan Group Companies MMC Group Statistics 50,000+ Employees Worldwide $10B+ in Global Revenues Clients in Over 100 Countries 3

5 & Company Overview Founded in 1921, is the world s leading risk and reinsurance specialist. The firm creates and executes innovative reinsurance and risk management solutions for clients around the world Headquartered in New York City, has 2,300+ colleagues in 50+ locations worldwide $975 million of revenue in 2010 Over $18 billion of ceded premiums placed across all lines of business Intellectual Capital Blog: GC Micro Risk Solutions webpage: 4

6 GC Micro Risk Solutions History 11/2008: GC awarded Innovation Grant from Microinsurance Innovation Facility 2/2009: establishes Micro Risk Solutions group responsible for: Micro(re)insurance business development worldwide Micro(re)insurance intellectual capital development Commercial micro(re)insurance market capacity development 1/2010: GC Micro completes first commercial microreinsurance transaction Also an industry first broker-market transaction Largest international transfer of microinsurance risk in history 5/2010: Innovation Grant completed months ahead of schedule Present: Completed several subsequent transactions and working actively with dozens of organizations on micro(re)insurance program development worldwide 5

7 GC Micro Risk Solutions Broad Agenda 6

8 The Importance of Microreinsurance

9 Catastrophe Micro(re)insurance Haiti Earthquake vs. Chile Earthquake Total economic loss: $10B (2011, Swiss Re Sigma) Of which insured: $100M (2011, Swiss Re Sigma) Of which reinsured: % Unknown 2010 GDP: US$6.59B (2010, CIA Factbook) Insured to Economic: 1% Economic to GDP: 152% Total economic loss: $30B (2011, Swiss Re Sigma) Of which insured: $8B (2011, Swiss Re Sigma) Of which reinsured: ~99% (2011, Guy Carpenter internal research) 2010 GDP: US$199B (2010, CIA Factbook) Insured to Economic: 27% Economic to GDP: 15% 8

10 Catastrophe Micro(re)insurance Haiti Earthquake vs. Chile Earthquake 2010 Chile EQ one year later Insurers paid well over a quarter of economic losses Reinsurers paid for nearly all of insured losses Economic recovery well underway* Economy has grown faster in the months following the quake than in the months immediately preceding Over 99% of public sites damaged now restored Net public reconstruction cost estimated at $8.4B over four years 2010 Haiti EQ one year later Insurers paid a very small amount of economic losses Reinsurance recoveries unknown, though inconsequential Heavy reliance on donor assistance Economic recovery very slow *Source: 9

11 Catastrophe Micro(re)insurance Conclusions Increased insurance penetration = improved post-disaster results Lower burden on public budgets/taxpayers Reduced reliance on foreign aid Increased resiliency/self-sufficiency of local populations Preparation for increasingly uncertain events (e.g. climate change) Acceleration of economic recovery The development of microinsurance solutions is essential for increased insurance penetration into low-income communities Reinsurance capital and expertise are essential for the development of appropriate and sustainable catastrophe risk transfer solutions Microreinsurance capital and expertise is vital to the economic sustainability of low-income communities 10

12 Microinsurance Challenges to Market Entry, Expansion and Sustainability Policy administration Underwriting Claims Distribution Access Volume Infrastructure Technology Regulation Capacity Intellectual Financial Microreinsurance 11

13 Microreinsurance Benefits and Applications Microreinsurance and related services can knock down barriers to microinsurance market entry, sustainability and growth Fundamental Benefits of Reinsurance Capacity (Per Risk and Aggregate) Surplus Relief Results Stabilization Catastrophe Protection Access to Resources and Expertise Innumerable Microreinsurance Applications Full spectrum MACRO: Government-level cat bonds MICRO: Risk transfer for MFIs Global Reinsurance Community MFIs NGOs Govts Insurers Dev. Banks Microinsureds 12

14 Micro(re)insurance Case Studies

15 Catastrophe Vulnerability Natural Disasters Economic Losses Index Haiti and Mozambique most vulnerable to economic losses from natural disaster Maplecroft, August, 2010* Rank Country Rating 1 Haiti Extreme 2 Mozambique Extreme 3 Honduras Extreme 4 Vanuatu Extreme 5 Zimbabwe Extreme 6 El Salvador Extreme 7 Nicaragua Extreme 8 Sri Lanka High 9 Fiji High 10 Tajikistan High Legend No Data --- Extreme Risk *Source: 14

16 GC Micro Risk Solutions Case Study Tamil Nadu Critical Illness Scheme Premium Risk-Financing Microreinsurers Pay portion of losses (eg 70% L/R excess 80% L/R) Provide underwriting input Reinsurance Intermediaries Design reinsurance Provide access to reinsurance market Gov t of Tamil Nadu Pays premium & enrolment cost Microinsurers Pay claims Buy reinsurance StarHealth Manage scheme Distribute policies Pay claims Microinsureds Receive USD 2k cover for critical illnesses over 4 yrs USD 10 premium per family per year Treatment prices pre-arranged with hospitals 13.5m families reached Note: Not all co-insurers and reinsurers shown 15

17 GC Micro Risk Solutions Case Study Orchard Insurance, Ltd. Background Select Africa, a leading Southern African MFI, provided Credit Life & Funeral microinsurance to borrowers via partner-agent model for several years To gain more autonomy surrounding microinsurance product design and pricing Select creates sister insurance company: Orchard Insurance, Ltd. To support new operation, Orchard engages GC Micro to obtain microreinsurance coverage Orchard and GC Micro work together continuously to negotiate with microreinsurers and to capitalize upon new geographic/product opportunities as they arise 16

18 GC Micro Risk Solutions Case Study MiCRO (Haiti) 17

19 GC Micro Risk Solutions Case Study GIIF Mozambique Agriculture Development Project Administers GIIF GIIF Local Capacity Building Partners Background GC Micro and RMS have joined to develop and implement index-based microinsurance products for the Agriculture market in Mozambique RMS to conduct risk modeling and GC Micro to develop stakeholder value chain IFC to provide financing and technical support where necessary 18

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