Catastrophe Insurance - An Unprecedented Market

As the world keeps heating up, the 500 year floods keep rolling in, and the category 4 and 5 hurricane and typhoons because a yearly event, catastrophe risk, reinsurance, and cat bonds are becoming more and more attractive. The demand for these insurance products have increased exponentially. https://seekingalpha.com/article/4360139-reinsurance-pricing-to-catch-up-demand-expected-to-rise-analysts

For governments, businesses, and even private individuals the attractiveness of insuring against “acts of God” or unpredictable catastrophic events is only met by increasingly expensive catastrophic insurance packages. The insurance industry, governments, and central banks will need to gather to discuss how to meet this demand, and insure against catastrophes that are becoming more and more expected, but continuously unpredictable. https://www.openpr.com/news/2099899/business-catastrophe-insurance-market-to-witness-massive

The growth in this market is expected to explore between 2020 to 2025. What does that mean for your business? What does that mean for your industry? The health and pharma industry, in light of the Covid-19 outbreak and pandemic, will face an influx in government investment, and a reckoning after the pandemic dust has settled on how they account for and price their services. The insurance industry may well face the same for catastrophe insurance. Insuring the uninsurable has its costs, but what do we do when the people who need this type of insurance the most can’t pay?

Sound off in the comments or in the form? What type of insurance product do you want to see? How do we calculate the risks associated with cat bonds and catastrophe insurance in light of seemingly more frequent catastrophes? Share your thoughts in the form below and I’ll highlight in the next insurance newsletter.

Insurance Market Newsletter Update

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GENERAL REINSURANCE AG APPOINTS ULRICH PASDIKA TO EXECUTIVE BOARD

BusinessWire: Gen Re has announced that Ulrich Pasdika has been appointed to the Executive Board of General Reinsurance AG, effective 1 August 2020. General Reinsurance AG is Gen Re’s German legal entity and the main risk carrier for its international business. https://www.businesswire.com/news/home/20200506005072/en/General-Reinsurance-AG-Appoints-Ulrich-Pasdika-Executive

 

HOW TO SUCCESSFULLY NAVIGATE THE IMPLICATIONS OF THE EVOLVING INSURANCE AND RISK MANAGEMENT COVID-19 ENVIRONMENT

Zawya: The report reinforces Marsh's commitment to guiding and supporting the region's businesses through the adverse effects of the COVID-19 outbreak. https://www.zawya.com/mena/en/press-releases/story/How_to_successfully_navigate_the_implications_of_the_evolving_insurance_and_risk_management_Covid19_environment-ZAWYA20200517065750/

 

TRIAD INSURANCE FIRM DONATES MONEY TO 12 COMMUNITY GROUPS

Triad Business Journal: Pennsylvania-based Lincoln National Corp., the parent company of Lincoln Financial Group in Greensboro, announced a second gift of $1 million to aid 60 local organizations across its corporate footprint with assistance programs aimed at food and housing insecurities. https://www.bizjournals.com/triad/news/2020/05/19/triad-firm-portions-out-1-million-to-local-groups.html

 

RESTAURANTS ARE SUING INSURANCE COMPANIES OVER UNPAID CLAIMS – AND BOTH SIDES SAY THEIR SURVIVAL IS AT STAKE

Chron: This month, the proprietors of more than 10 restaurants, bars and bakeries in Washington, including the Michelin-starred Gravitas and Pineapple and Pearls, sued their shared insurance company, joining a growing list of restaurateurs who are seeking relief from an industry they thought would protect them from any unpredictable event, including a pandemic of historic proportions. https://www.chron.com/business/article/Restaurants-are-suing-insurance-companies-over-15280467.php

 

THE WORKPLACE AND COVID-19: WORKERS’ COMPENSATION TO THE RESCUE? 

Forbes: Employees who were not furloughed or laid off because of the COVID-19 pandemic and economic fallout continue to work. While some became “remote” workers overnight, others–like many in the food and beverage industry–still go to work. These “essential” employees confront the risk of contracting COVID-19 at work. https://www.forbes.com/sites/aaroncolby/2020/05/13/the-workplace-and-covid-19-workers-compensation-to-the-rescue/#351cfb606295

 

CITIZENS INSURANCE USES FUNDS WISELY TO BEST SERVE ITS POLICYHOLDERS

Miami Herald: Preparing for the 2020 hurricane season while Floridians battle COVID-19 requires that Citizens Property Insurance Corp. be running on all cylinders, especially in South Florida where more than half of our 455.000 policyholders live and work. Read more here: https://www.miamiherald.com/opinion/letters-to-the-editor/article242846271.html#storylink=cpy

 

GLOBAL INSURANCE MARKET IS WELL CAPITALIZED IN THE FACE OF COVID-19: REPORT

The New York Times: Global insurers are well capitalized to absorb the hit from rising claims and costs related to the COVID-19 pandemic, ratings agency AM Best said on Monday, citing a stress test it conducted to gauge the immediate impact of outbreak on insurers' financial strength. https://www.nytimes.com/reuters/2020/05/18/world/europe/18reuters-health-coronavirus-insurance.html

 

EVEREST INSURANCE TAPS PATEL FROM AIG EUROPE AS UK HEAD OF TRANSACTIONAL RISK

Insurance Journal: Everest Insurance announced the appointment of Sujal Patel as the UK Head of Transactional Risk for Everest Global Markets, which includes Everest Insurance Ireland, dac. and Lloyd’s Syndicate 2786. https://www.insurancejournal.com/news/international/2020/05/13/568339.htm

 

AM BEST AFFIRMS CREDIT RATINGS OF AL AHLEIA INSURANCE COMPANY S.A.K.P

AM Best: AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Al Ahleia Insurance Company S.A.K.P. (Al Ahleia) (Kuwait). The outlook of these Credit Ratings (ratings) remains stable. https://www.businesswire.com/news/home/20200515005425/en/Affirms-Credit-Ratings-Al-Ahleia-Insurance-Company

 

IC EXTENDS REGULATORY RELIEF TO INSURANCE FIRMS

Business Mirror: The Insurance Commission (IC) raised the exposure limit of insurance companies for their respective financial assistance programs to 20 percent of the company’s net worth to help ease the financial burden of its personnel due to coronavirus disease 2019 (Covid-19) pandemic. https://businessmirror.com.ph/2020/05/19/ic-extends-regulatory-relief-to-insurance-firms/

SIFMA INSIGHTS: The Evolution of the Fintech Narrative

SIFMA Insights, Katie Kolchin, CFA Director of Research kkolchin@sifma.org, released a helpful and detailed report on The Evolution of the Fintech Narrative; Analyzing Opportunities in Capital Markets.

https://www.sifma.org/wp-content/uploads/2020/05/SIFMA-Insights-The-Evolution-of-the-Fintech-Narrative_FOR-WEB.pdf

Fintech has been the defining attribute that has indicated whether a new security might sink or swim, but now it is time to review our history with the new age of data, and evaluate how we can improve our businesses, how we serve our customers, and evaluate next steps. Some interesting points Ms. Kolchin makes include:

  • it is necessary to adapt our fintech solutions on the user or customer side to customer expectations and competency levels. Fintech solutions should be user friendly, and should adapt quickly to changing user habits.

  • Many of the companies that are doing better than others now made key strategic IT investments 10 or more years ago. While throwing money at new fintech gimmicks is not advisable, it is important to invest heavily in IT development and cybersecurity in preparation for the next market cycle.

  • Capital markets firms are looking at the following approach to technology: update legacy systems, adopt new technologies, improve client experience, and invest in cybersecurity.

Ms. Kolchin has a thoroughly investigated SIFMA Insight on the growth and evolution of Fintech, and I encourage you to read it when you have some time. Keep in mind that fintech won’t necessarily just benefit your company, it may be the defining factor in how your business fares in the next 10 years.

Risk Management Check-up in 2020

As the new year and the new decade starts ramping up, now is the time to evaluate the risks that can potentially impact your business. Take a moment to review how your risk management team operates, how they identify day-to-day, month-to-month, and quarterly risks to your enterprise, and also evaluate how you are mitigating those identified risks. Here is a short checklist to keep your risk management system lean and efficient in the new year.

  1. What risks could result in legal action or worse, criminal action for your company? Do you have a full inventory of these risks? Have you reviewed new compliance and federal regulations impacting your industry or the clients you serve? Make sure your Chief Compliance Officer and your Chief Risk Officer are up-to-date on the latest in regulatory changes.

  2. What currencies do you do business in? Are there countries where currency fluctuation could be substantial in 2020? See what you can do in future contracts and business decisions to minimize your risk here.

  3. Very few companies are cyber-fit. Take the time to give your business and its employees a cyber workout. Do a cybersecurity training, check in with your cybersecurity team, and consider purchasing cyber risk insurance while you have yet to have an incident. Don’t forget to check in with your IT team, your systems manager, and your data management provider to find out where the weaknesses lie.

  4. How is your market changing this year? What competitors, customers, and providers have gone out of business in the last two years, and why? What do you need to do to stay innovative, and where are the weaknesses in your customer base and market share.

  5. What does your average customer or client look like? How financially fit is your customer? What is the likelihood of non-payment, bankruptcy, or loan defaults? Make sure your credit risk, both for clients and for business partners, is manageable and well leveraged. Who is your backup provider for each of your crucial business inputs. Even if you’re not doing business with that provider now, you should always have a backup in mind.

These five steps don’t cover every risk your company may face this year, but they will hopefully point you in the right direction towards a healthy risk management program in your enterprise for 2020. Are you considering doing business in a new region, or introducing a new product? Consider Resolution Consulting as a resource for your newest project feasibility studies.

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