June 29th, 2016

Challenges Facing Public/Private Sector Management of Risk

Posted at 1:00 AM ET

Here we review GC Capital Ideas posts on the challenges bringing the public and private sectors together to manage catastrophe risk exposure.

The Fundamental Challenges In Unlocking Publicly Held Loss Exposure and The Role of Public-Private-Partnerships: Despite growing awareness of the challenges associated with managing risk, there is much work to do in bringing together the public and private sectors to solve for this growing need. Fortunately, all potential participants acknowledge that in the current environment collaborating to develop solutions will benefit all stakeholders. For example, involvement on the part of the (re)insurance industry in sustainable partnerships to manage risks held by government has become more pronounced. Insurers from across the globe, representing 20 percent of world premium volume with USD 14 trillion in assets under management, have partnered with the United Nations to strengthen the industry’s commitments to sustainable development and to establish Principles for Sustainable Insurance.

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Risk Awareness: Identifying, prioritizing, selecting, executing and monitoring results of risk management projects are essential. As noted by the US Government Accountability Office in their post Hurricane Sandy review, an investment strategy would help the Federal Government enhance resilience for future disasters. Unless a clear risk-return framework is established, the opportunity to reduce publically held exposure will be challenging and the inertia around the status quo could endure until loss events occur that force reactionary funding from the public sector.

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