Guy Carpenter announced the release of its Public Sector Risk Report, Partnerships: The Way to Public Sector Risk Financing, which examines the shifting economic and risk landscapes that are driving public sector entities to consider new approaches to risk financing.
“The impact that catastrophic loss can have on the fiscal position and tax base of government entities across the globe is significant,” said Britt Newhouse, Chairman of Guy Carpenter. “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.”
According to the report, approximately 73 percent, or $2.7 trillion, of natural catastrophe losses globally between 1970 and 2014 were uninsured. Heads of government, international trade organizations and private-sector risk bearers are seeking to re-examine roles and responsibilities through which societies can better manage these complicated risks.
As governments across the globe examine new methods to manage and transfer this risk to the private sector, there are many developments underway to support this changing paradigm. Public-Private-Partnerships (PPPs), for example, have been established for greater economic security. In addition, an increase in capital entering the (re)insurance market and advancements in improving the measurability of risk have led to the introduction of other innovative risk transfer solutions.
“We have seen significant growth in public sector entities transferring risk to the reinsurance market via traditional risk transfer structures, collateralized reinsurance and catastrophe bonds,” said Jonathan Clark, Managing Director and North America head of Guy Carpenter’s Public Sector Specialty Practice. “Reinsurance capacity has been instrumental in providing both savings to public sector entities in years with outsized loss activity as well as protections for loss reserve funds/surplus. At Guy Carpenter, we are committed to helping our clients understand the evolving landscape while supporting their efforts to engage and take advantage of promising business opportunities.”