November 2nd, 2017

Asia Pacific Catastrophe Report 2017: Executive Summary: Protection Gap and Convergence Capital

Posted at 4:00 AM ET

cover-thumb1The proportion of losses uninsured in the Asia Pacific region remains high. For example, examination of this year’s major landfalling typhoons in China shows a wide discrepancy between economic and insured losses.

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On average, just 10 percent of the total economic loss is likely to be recovered from the insurance market. Contrast that with the insurance market penetration in two of this year’s headline grabbing storms in the United States.

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The tables indicate that insurance penetration in the United States is much higher, close to 40 percent. Clearly, this indicates room for growth in the Asia insurance markets.

Convergence Capital

As a source for natural catastrophe risk transfer “alternative” to traditional reinsurance, convergence capital continued to exhibit steady growth to meet the demands of various risk transfer counterparties. Commonly referred to as insurance-linked securities, the collection of collateralized reinsurance, catastrophe bonds, industry loss warranties, and sidecars was considered to have reached an estimated USD 75 billion, approximately 20 percent of the global catastrophe risk limit. As of September 30, 2017, approximately 11.6 percent of total global outstanding catastrophe bond risk limit provided capital markets-backed reinsurance protection to Asia Pacific sponsors, which comprised mostly Japanese and Australian cedents. The nominal risk limit outstanding in the Asia Pacific region experienced a net increase of 5 percent.

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*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities LLC, 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 LLC, 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.

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