The insurance industry, the United Nations and the World Bank have formed a public-private partnership designed to help bridge the “protection gap” for developing nations, which struggle increasingly from the burden of uninsured economic losses after natural disasters.
The Insurance Development Forum (IDF) was launched last week in Washington, D.C. and is chaired by Stephen Catlin, XL Catlin’s executive deputy chairman. A high-level group of senior insurance industry leaders and government institutions will also participate in an IDF steering group.
In developing nations, more than 90 percent of the economic costs of natural disasters are uninsured, which is known as the “protection gap,” said a statement from the IDF.
To help bridge the gap, the IDF has a mission to help governments better understand and use risk management tools, increasing access to insurance and helping them better deploy their resources by improving infrastructure resilience “to protect people and their property.”
“Research has shown that a 1 percent increase in insurance penetration can reduce the disaster recovery burden on taxpayers by 22 percent,” said Catlin in a statement issued by the IDF.
Insurers’ risk management skills and ability to assess natural disaster risk can be exported to help governments reduce future losses by designing in resilience into infrastructure projects, he said.
Also, by increasing the use of insurance, people would be better able to protect their families, property and assets after a disaster hits, he said.
Risk identification, measurement, pooling and diversification are essential features of any successful insurance program, Catlin affirmed, noting that by making these skills available, insurance penetration will increase.
During its inaugural meeting, the IDF established four priority work streams: 1) understanding risk; 2) risk and insurance regulation, legislation and policy; 3) risk sharing, transfer and response; and 4) risk and resilience.
“We have seen growing demand from our client countries for solutions to manage the costs from disasters effectively, and this is best done by specifically addressing the different layers of risk. However, the insurance market is close to non-existent in many countries,” said IDF Co-Chair Joaquim Levy, who is managing director and World Bank Group chief financial officer. (Levy is former Minister of Finance of Brazil.)
He predicted that the IDF will be pivotal in helping to develop micro insurance for natural disaster risk as well as protection against against pandemics. “With only about 17 percent of people in low and middle income countries with financial savings and insurance, compared to 45 percent in high income countries, it is the most vulnerable in our society who will benefit most from being insured,” Levy said.
The IDF has the potential to create a risk informed and sustainable future for countries and communities that are vulnerable to disasters, said Michael O’Neill, assistant administrator for the United Nations Development Program (UNDP). (He was speaking on behalf of another IDF co-chair, Helen Clark, who is administrator of the UNDP and former prime minister of New Zealand.)
Catlin said the IDF brings together industry resources via members of the International Insurance Society, the Geneva Association, the International Cooperative and Mutual Insurance Federation and the Association of Bermuda Insurers and Reinsurers.
Source: Insurance Development Forum
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