Natural catastrophes – addressing the challenge

In the chapter devoted to addressing the challenge of natural catastrophes, the publication says that "nat cats" will remain a staple of the insurance industry. Yet, arguably more so than any other risk, nat cats show how the insurance industry has managed to spread its safety network. Not so long ago, such risks were thought to be practically uninsurable. However, the progress of modelling techniques, accumulated expertise and the development of alternative products to spread risks have created a plethora of new ways to respond.

Referencing one the "new" ways the insurance industry has addressed the nat cat challenge, sigma describes how Swiss Re was one of the pioneers of insurance-linked securities (or cat bonds), which enabled the raising of fresh capital to help close the nat cat protection gap. The publication also talks about the emergence of micro-insurance as way of providing insurance coverage to the poorest victims of natural catastrophes.