28 August 2014News

Reinsurers can help make governments more robust

Reinsurers are vital in strengthening governments’ resilience to the financial blows resulting from natural disasters.

This is the latest judgment of Standard & Poor’s, which highlights that rising losses in the wake of natural catastrophes are increasing economic instability in many developing economies, leaving emerging economies even more vulnerable.

The rating agency said that reinsurers can and should work together with governments to build catastrophe resilience before the event which will provide timely relief, recovery and reconstruction funding, and more broadly, protect economic stability.

It also advised that working with governments could open new doors for reinsurers. It explained that that the successful development of this market might be crucial to entrenching the relevance of insurance in high-growth markets.

“Ultimately, developing a market for these products will help reinsurers reinforce their relevance to new clients and new risks should lead to a stronger insurance market and increased insurance penetration (measured as insurance premium as a percentage of GDP),” said the rating agency.

“We consider that the reinsurance industry has a long-term and important role to play in developing awareness and acceptance of insurance-backed solutions for states' catastrophe exposure. In our view, taking on this role will provide diversification of risk exposure, help to educate and develop new insurance markets that can provide growth potential for years to come, and ultimately reinforce reinsurers' relevance to a new set of potential clients,” said S&P.