The efforts of the World Bank around catastrophe risk financing for its members continues to be a real benefit, and while the organisation can and will do more, this isnt about being the dominant force in the marketplace, according to Michael Bennett, Head of Derivatives & & Structured Finance, World Bank Treasury.During last months annual ILS conference in New York City, held virtually for the very first time owing to restrictions, Artemis consulted with Bennett about the World Banks use of reinsurance and insurance-linked securities (ILS) structures for member federal governments, and how this may evolve in the future.
Far, the World Bank has actually moved some $4.5 billion of danger to the markets, of which the large bulk (65%) has actually been by means of ILS structures; revealing how useful capital markets-backed defense has been for both the organisation and its members.
Despite the World Bank having “just scratched the surface area” on what it can do with governments looking to move some of their catastrophe risk, Bennett described that its completely supportive of members going straight to market.
” Its certainly not our goal to dominate the sovereign side of the marketplace. And, we think we have a great mousetrap in this location, in terms of our feline bond program, and even our reinsurance capability is a significant advantage we provide to member federal governments.
” But, definitely, we would totally support federal governments going straight to the marketplace. We d love to see, as weve said, just more universal application of disaster threat hedging,” he said.
According to Bennett, a truly terrific thing to see in the future would be for federal governments to go straight to the ILS market to secure a specific level of natural catastrophe coverage through their own sovereign bond issuances.
” If they could get that protection by embedding into sovereign bonds provisions that they get an interest holiday for a certain duration of time if an event happens, that would be a great service also.
” Now, how sensible that is, I dont understand. Because today, naturally, sovereign bond investors and ILS investors are different characters and the Venn diagram where they meet is probably extremely small. But solutions like that, where natural disaster security is more completely embedded into other monetary items, I think would be a terrific thing to see in the future,” said Bennett.
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” Now, how practical that is, I dont know. Due to the fact that right now, of course, sovereign bond financiers and ILS investors are different characters and the Venn diagram where they fulfill is most likely really small. Solutions like that, where natural disaster security is more completely embedded into other financial products, I believe would be a terrific thing to see in the future,” stated Bennett.
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