Homing in on government
de-risking opportunities
As AXA XL moves forward with a new operational structure,
it is also eyeing opportunities to grow and make a wider
difference. Charles Cooper discusses with Bermuda:Re+ILS the
opportunities available to help close the protection gap and
why life is better for XL Group with its new parent.
Helping governments move risk off their books could
provide the risk transfer industry with a big opportunity
for growth—but a collaborative approach is required,
according to Charles Cooper, chief executive of
reinsurance at AXA XL.
He says that a growing number of initiatives have come to market
with this goal, including US flood risk, US mortgage risk and UK
terrorism risk—on top of a number of US wind pools that have used
reinsurance for many years.
As governments increasingly struggle to meet budgets and balance
the books, more opportunities will emerge.
“We think this is the right thing to do, both for the world and
for the industry to achieve growth,” Cooper says. “Governments
are increasingly seeing the value of this, and how it can speed up
recovery in the aftermath of a disaster.”
Making a difference
AXA XL has released a report on the subject, titled “Government
de-risking” which examines the opportunity in this sector. It notes
that despite the issue being talked about for decades, “it seems we’ve
hardly made a dent”.
According to a 2018 Lloyd’s report on the subject, the underinsurance
gap was $162.5 billion in 2018, which is only a 3 percent reduction
during the past six years. Emerging economies account for 96 percent
of the total global insurance protection gap, with two of the world’s
most populated countries, China and India, having the largest gap in
dollar terms—$76.4 billion and $27 billion, respectively, followed by
Indonesia with $14.6 billion.
Writing in the AXA XL report, chief executive officer Greg
Hendrick suggested that re/insurers had the potential to help cover this
gap—especially if they realigned their values away from simply paying
claims and towards a partner that helps manage risk at all levels.
“The private re/insurance market can provide the necessary cover
to help close the protection gap,” Hendrick wrote. “Risk continues to
increase in frequency, severity and complexity, often having the most
impact on the most vulnerable. However, these groups are often those
who have no access to or the means to buy insurance.
“Governments are uniquely positioned to assume and cede these
risks, to protect and help rebuild the livelihoods of families impacted
by disaster. Equally, governments can enhance their social and
economic stability while reducing their fiscal risks through the use
of effective insurance programmes for their public assets which not
only provide protection for when disaster strikes, but also drive risk
mitigation and general risk management practices.
“It’s clear that there’s much work to be done to close the
protection gap. As we expand our ‘payer to partner’ strategy at AXA
20
November 2019
Bermuda:Re/insurance+ILS
AXA XL