How public sector partnerships can build resilience and close the protection gap
Guy Carpenter’s head of public sector EMEA, Ruth Lux, discusses the increasingly important role the (re)insurance industry can play in relieving the burden on taxpayers by providing certainty for global government entities through public sector partnerships.
Public sector (re)insurance and risk management solutions can “play a significant role” in relieving the burden on taxpayers in both mature and emerging markets, Lux told The Insurer ahead of this year’s reinsurance gathering in Baden-Baden.
Lux said that governments typically pick up the unbudgeted costs associated with responding to natural and man-made disasters either through welfare payments, emergency disaster relief expenditure or by rebuilding infrastructure and repairing damages.
“This places a significant burden on public balance sheets at a time when it is least welcome,” Lux said.
“The burden on taxpayers and public finances can be reduced by establishing private sector pre-financing options and the (re)insurance industry’s ability to provide speedy claims payments post-loss means that financial relief can be delivered to those in greatest need.”
Lux forecast that there are significant opportunities for the reinsurance market to grow in this area through offering customized solutions directly to the public sector, “whether at a sovereign, state or municipal level.”
More than any other benefit that governments are seeking to gain through insurance partnerships is the speed of claim and payout and the certainty of cover afforded. Lux said that (re)insurance capital has proven its ability to act rapidly in times of crisis, offering support to governments when they need it most.
Public private partnerships can also be used as a mechanism to move towards closing the protection gap in the public sector sphere.
Lux added that a number of factors are contributing to the global insurance gap including losses from risks considered to be uninsurable, low insurance penetration rates and losses from emerging risks and unknown exposures.
Lux also pointed to the impact of the effects of climate change which she said has obliged stakeholders to re-think their approach to climate resilience.
“At Guy Carpenter we see efforts to improve societal resilience to the effects of climate change as a huge opportunity for the (re)insurance industry. The industry has the collective tools and expertise to identify, assess and price risk, to then allow the (re)insurance market to assume that risk for a price.”