We have seen significant growth in public sector entities transferring risk to the reinsurance market utilizing traditional risk transfer structures and alternative risk transfer structures such as collateralized reinsurance and catastrophe bonds.
The use of risk transfer capacity is instrumental in many ways. It provides significant savings to public sector entities in years with outsized loss activity and it supplements and protects loss reserve funds/surplus built in years where losses have not exceeded retained premium.
As public entities strive to reduce public debt, there is a clear benefit derived from limiting the risk that natural perils can pose to a state’s balance sheet. Governments may be spared the enormous costs following catastrophic loss events. They gain enhanced flexibility to finance economic and social development and build infrastructure, reducing the likelihood of increased taxation and/or assessments/surcharges as a result of the adverse events. These solutions also allow local economies to recover more quickly.
Guy Carpenter, GC Securities* and the Marsh & McLennan Companies are committed to helping our clients understand the evolving landscape while supporting their efforts to engage and take advantage of the promising business opportunities. Moving forward, we believe these opportunities will expand as public and private sector entities work more closely to address the challenges societies must identify and resolve.
*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/NFA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.