Resilience and Recovery:

A Reinsurance Perspective

Mike CohenVice President, Government Affairs RenaissanceReDirector, RenaissanceRe Risk Sciences Foundation

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Reinsurance: “Insurance for Insurance Companies”

Why do you buy insurance? Why does your insurer buy reinsurance?

Protection for catastrophic loss to your family: Protection for catastrophic losses to an insurer:

Share your risk with others insured by a primary insurance company –

good diversification

Spread catastrophic risks with others around the world – very significant

diversification

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Available Reinsurance Capital Is GrowingUS

D (b

illio

ns)

Exhibit 1: Global Reinsurer Capital

700

600

500

400

385

Traditional Capital A lternative Capital G loba l Reinsurer Capital

410

340 6% -17% 18%

400

18%

470 455

-3% 11%

505

7%

540

575 6%

511

300

200

100

368 388

321

378

447 428

466 490

0 28 39 50 64

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Source : C o m p any re po rts , A on B enfie ld A na ly tic s

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What Natural Hazard Mitigation Looks Like…

What Climate Change Adaptation Looks Like…

Spot the Difference…

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Remove the Clouds Masking The Need to Mitigate

“The number one focus of public policy should be reducing risk to human life.”- Hurricane Risk Mitigation Leadership Forum ‘Key Principles’

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U.S. Federal Disaster Relief Has Been Increasing Dramatically Over Time

Number of U.S. Presidential Disaster Declarations – 1953-2011

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Role of Federal Government in Covering Disaster Losses (proportion of total loss paid by government)

Sources: E. Michel-Kerjan. Have We Entered an Ever-Growing Cycle on Government Disaster Relief? - Testimony before the U.S. Senate (2013).

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To Put Things in Perspective

Sources: Kousky and Shabman (2013)

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Does Disaster Aid Affect Insurance Purchase Decisions?

It DOES.First empirical study

ever undertakenWe find that a $1,000

increase in the federal government’s average individual assistance grant decreases average flood insurance coverage by about $6,350.

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“… salt marshes have value for coastal hazard mitigation and climate change adaptation”

“Monetary value of U.S. wetlands from the standpoint of hurricane protection alone: $23.3 billion per year”Costanza et al, 2008

Evaluate the Benefits of Green Infrastructure

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Special Challenges for Americans of Lesser Means

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www.mitigationleadership.com

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Recent Test of Manufactured Home At IBHS Facility