Approximately $2.7 trillion of natural catastrophe losses globally went uninsured between 1970 and 2014, causing heads of government, international trade organisations and private-sector risk bearers to consider new approaches to risk financing, according to a Guy Carpenter & Company report.
The report, Partnerships: The Way to Public Sector Risk Financing, examined the shifting economic and risk landscapes that are driving public sector entities to consider new approaches to risk financing.
According to the report, governments across the globe are examining new methods to manage and transfer risk to this private sector and there are already many developments underway to support this change.
Britt Newhouse, chairman of Guy Carpenter, commented: “The impact that catastrophic loss can have on the fiscal position and tax base of government entities across the globe is significant.”
“The creation of private sector pre-financing options will not only relieve the burden on taxpayers and public finances, but will migrate the management of these catastrophes to insurance and reinsurance companies where claims handling and risk management are at the core of their operations.”
Jonathan Clark, managing director and North America head of Guy Carpenter’s public sector specialty practice, added: “We have seen significant growth in public sector entities transferring risk to the reinsurance market via traditional risk transfer structures, collateralised reinsurance and catastrophe bonds.”
