GAM: Insurance Linked Securities: Bridging the Disaster Gap

Having demonstrated their value following the 2017 hurricane season, the market for insurance-linked securities, including cat bonds, is set to grow substantially this year.

The close of 2017 marks the end of one of the worst years for   insured   disasters   in   recent   history.   Three   major hurricanes in quick succession – Hurricanes Harvey, Irma and Maria – wreaked havoc in the Caribbean, Puerto Rico and the US with devastating winds, extreme rainfall and resultant  flooding.  These  events  happened  at  the  same time as powerful earthquakes in Mexico and were followed by unprecedented wildfires in California. Together these disasters affected the lives and livelihoods of millions of people and led to some of the largest insurance industry losses  to  date.  It  is  estimated  that  the  total  property insurance  market  losses  for  2017  will  exceed  USD  100 billion  globally,  making  it,  in  absolute  terms,  one  of  the worst  insurance  loss  years  on  record1.  The  economic losses for the events of 2017 will sadly far outweigh the insured losses, including in the mainland US with one of the most developed insurance markets in the world2,3. This means the cost of the uninsured portion of losses will fall to governments, corporations and individuals to manage....Read whole article here