On these shoulders (international reinsurance)
Research by the Association of Bermuda Insurers and Reinsurers (ABIR), which examined the extent of international reinsurance’s involvement in recent catastrophe losses in geographies as disparate as Chile, Japan and New Zealand, found that the reinsurers’ share of losses were signiﬁcant. Of the approximately $107 billion of insured losses, around 45 percent was borne by international reinsurers.
Bermuda, as a leading domicile, shouldered a signiﬁcant portion of these losses and as Brad Kading, president of ABIR pointed out, the Island continues to play a signiﬁcant role in enabling loss-hit territories to overcome the effects of catastrophe events. As the report detailed, international reinsurance helps to “speed recovery in the disaster-affected economy, since the loss is not largely borne by the local business and insurance community”. Rather, reinsurers help diversify risk and loss costs.
The ABIR found that “the larger the loss, generally the greater share of the loss that ﬂows into reinsurance markets. The share of the 2011 mega event cat losses that were reinsured ranged from 40 percent to 73 percent”, said Kading (see Table below). Such statistics provide conclusive evidence as to the ongoing value of global reinsurance. As Robert Hartwig, president and economist for the Insurance Information Institute, indicated: “reinsurers’ unique ability to pool risk and pay claims on a global scale produces all the same welfare-enhancing effects for businesses and consumers as free trade—helping stimulate economic growth, jobs and fostering stability”.
Talking about the role that international reinsurers played in helping New Zealand recover from the string of earthquakes that struck Christchurch in 2011, Ian Simpson, chief executive of the New Zealand Earthquake Commission, said that “international reinsurance has been, and will remain, essential to the Earthquake Commission and New Zealand”.
The Earthquake Commission “has already paid out more than $2.9 billion to settle claims and it’s expected this will rise to a total of $12 billion over the next three or four years. Most of this will be covered by the Earthquake Commission’s $6 billion Natural Disaster Fund and international reinsurers, with the New Zealand Government guaranteeing any shortfall”.
Simpson said that “Bermuda-based reinsurers provide 40 percent of the Earthquake Commission’s cover—more than any other market. Our experience to date is that reinsurance cover remains available, albeit at a higher price”. It would seem that Bermuda reinsurers have once again proven their worth and continue to provide coverage to a region facing losses from a string of devastating events.