At a phone conference hosted by the Reinsurance Association of America (RAA) on Monday, Brad Kading of the Association for Bermuda Insurers and Reinsurers made a strong case for the re/insurance sector when it comes to grappling with major catastrophes like Hurricane Sandy—and beyond.
Kading pointed out that the larger a catastrophe event and the more commercial losses generated, the more likely the cost will be paid by the re/insurance sector, a reality that is pertinent to New York and New Jersey’s current situation.
“The degree of losses – and certainly in the New York City area – is expected to be a large amount of commercial losses,” Kading said. “That probably carries with it a high percentage of reinsurance recovery.” Kading also made a case for the re/insurance market as a whole when he pointed out that by pooling losses from large events and distributing those losses around the world, the pain becomes less for everyone involved.
“Another point important to this is the re/insurers’ economic contribution to the jurisdiction in which the event occurred,” Kading concluded. “Nearly all re/insurance is paid by re/insurers not domesticated in the jurisdiction in which the event occurred. This is a tremendous cash infusion into the economy where the even occurs and, since it’s an external source of cash and capital, it helps speed up recovery. That would also be true of the US nat cat events, since a large share of these losses will ultimately be borne by non-US insurers or re/insurers. ”
Reinsurance Association of America, Association of British Insurers and Reinsurers, Hurricane Sandy, reinsurance