While concerns regarding the selective appetite of private markets for backing catastrophic risk have unfolded in areas with large losses in recent years, the reinsurance market has become well-versed at overcoming major losses and has navigated a number of capital challenges following major disasters, such as the September 11 attacks, Hurricane Katrina, and the succession of catastrophic loss events in 2017 (Hurricanes Harvey, Irma and Maria). On each occasion, the reinsurance market responded by innovating, consolidating and attracting more capital. Since 2012, dedicated reinsurance capital has increased by more than USD 100 billion and is now estimated at USD 471 billion in fall 2020¹.
Although initial hesitancies may persist as Community Based Catastrophe Insurance (CBCI) solutions move toward implementation, the long-term potential of CBCI programs presents promising relationship benefits for insurers, reinsurers and capital markets investors.
A new report from Guy Carpenter, Marsh & McLennan Advantage, and the Wharton Risk Management and Decision Processes Center, Community-Based Catastrophe Insurance: A Model for Closing the Disaster Protection Gap, sets out an innovative model to deliver insurance and help communities close the disaster protection gap.