Author Archives: Daniel Stander

About Daniel Stander

Global Managing Director, RMS
Daniel has spent 20 years bringing new ideas to the risk industry. He has responsibility for driving innovative, strategic solutions across RMS’ entire client base. He is also the Global Head of RMS’ Public Sector Group, leading RMS’ relationships at all levels of government.

Daniel has worked closely with public and private entities around the world, advising them on a variety of complex risks, including natural hazards, environmental stresses, malicious attacks and pandemic outbreaks. Deeply committed to education, his work is motivated by a desire to make communities and economies more resilient to acute shocks.

Prior to RMS, Daniel managed the group strategy and development function at an 80,000-employee, £10 billion global healthcare group, serving 30 million customers in over 190 countries. He also has considerable start-up experience, having been a founding team member of an award-winning, SaaS company.

The driving force behind 'Resilience', he received a City of Miami Proclamation recognizing his commitment to delivering urban resilience in the face of sea-level rise and extreme flooding. Daniel has served on the management boards of several charities in areas as varied as education, disability, interfaith social cohesion, grassroots sport and the arts.

Daniel graduated from Oxford, double-first with Honours. He also studied for a Masters at the Humboldt in Berlin and is a graduate of the Center of Creative Leadership.

Financing Resilience

Almost one and a half million people have died in natural disasters over the past 20 years. This is a waste of life; a waste of potential.

Natural disasters also have a massive economic impact. Our models suggest natural catastrophes cost the world’s poorest countries almost US$30 billion a year on average. Hard-won development gains are regularly wiped out — and it is the poor and the vulnerable who are most impacted.

In case anyone had forgotten the crippling impacts of natural disasters, 2017 served a painful reminder. Hurricanes Irma and Maria left vulnerable people in the Caribbean devastated. Somalia, Ethiopia and Kenya struggled with drought. Floods and landslides wrecked lives and livelihoods in Sri Lanka and Bangladesh. And then there was Hurricane Harvey which, along with the California wildfires, made 2017 the costliest on record in the United States.

Whenever and wherever catastrophe strikes, our thoughts are with those so profoundly affected.

We did not, however, need last summer’s tropical cyclones to understand that something is not working. We did not need Irma and Maria to learn that investments in resilience reduce losses from natural disasters. And we did not need the events of 2017 to know that incentives are too often insufficient to drive action in the most vulnerable regions.

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Resilience 2018: Driven by Purpose

There is nothing quite like a “banging EP” to make me feel young again. But that wasn’t the only aspect of my most recent trip to Miami that brought out the millennial in me.

If you missed Exceedance 2018 a few weeks back, you probably also missed Resilience 2018. Embedded every year within Exceedance, RMS holds a space for policymakers and business leaders to collaborate to a very important end: ensuring local communities and regional economies are resilient to the shocks and stresses they face.

Much has been written about how millennials seek work that is meaningful (Schullery, 2013); work which solidifies their self-efficacy (Chalofsky + Cavallaro, 2013). I also blog about the relationship between aims and actions; between purpose and profit.

And there’s some truth in the generational stereotypes. After all, research suggests that impact investing continues to “skyrocket.”

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Enter the Centre

On July 8 last year, the U.K. Prime Minister, Theresa May, announced her intention to establish the Centre for Global Disaster Protection.

The big idea: capitalize on the City of London’s expertise in financial services in order to help the governments of developing countries become more resilient to natural disasters, using risk transfer, where appropriate, to avoid humanitarian crises and augment disaster aid.

Later that month, Lord Bates, the U.K. Government Minister of State for International Development, shared more color on the Centre’s remit. Addressing the International Insurance Society, he explained:

“It is about investing in the data, research and cutting-edge science to analyze risk and design systems that work well for the poorest people. It is about providing training and sophisticated analytics.

It is about pre-disaster planning, including bringing vulnerable people into the dialogue on how support should flow in an emergency.

It is about providing neutral advice — supporting countries in making decisions about which financial instruments are right for them.

It is about innovation — looking at new ways of working and building new collaborations across the finance and humanitarian communities, to design financial instruments that work for developing countries.”

Lord Bates’ address also highlighted the analytical role RMS played in the U.K. Government’s decision to create the Centre.

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New Opportunities for Investors Willing to Embrace the “Resilience Gap”

This is a reprint of a “Trading Room” interview from Trading Risk magazine, please click here to visit the magazine website.

 

Opportunities abound for investors willing to embrace the resilience gap, according to RMS global managing director Daniel Stander

How does the Protection Gap offer opportunities for investors?

I’m afraid you’ve pushed one of my buttons with your very first question! I’ve been trying (unsuccessfully it seems) to move the debate away from the “protection gap”. I much prefer to talk about the “resilience gap”. This isn’t me being a pedant. The language we use here is important. Framing the problem in terms of “protection” grounds the debate in risk-transfer solutions.

But we all know that risk capital alone cannot address the fact that communities all over the world are frequently brought to their knees by the impacts of extreme events. Risk financing is no silver bullet. Those at risk — from the individual homeowner to the elected official governing a sovereign state — need much more than just contingent capital to materially increase their resilience to acute shocks. They need to develop a deeper understanding of the risks they face — and how it compares to their desired ability to withstand extremes.

More than that, they need to understand what interventions offer an acceptable ROI — from enforcing building codes to preserving nature-based defenses. And then of course they need to be prepared to respond effectively when the ground shakes or the wind blows, lest the economic impacts escalate. Opportunities abound for investors – but they will only be seized by those who can embrace the totality of the “resilience gap” and position their risk capital in the totality of the need.

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Purpose before Profit: The Rise of Impact Investing

I had the privilege of following Ben Brookes onto the Exceedance main stage in 2015. I can’t remember a word of my talk, but something Ben said while I was watching him from the green room has stayed with me ever since:

“Some, like Aubrey de Grey, believe that the first person to live to 1,000 has already been born.”

If that sounds to you like the claim of an oddball biogerontologist, you’re not alone. I for one remember scratching my head quizzically at the time.

All the same, it certainly got me thinking. If we’re going to live that long, we’re going to need something worthwhile to keep us busy. We’re all going to need to find a purpose; a focus for our energies.

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Flood Risk, NFIP and the Role of Reinsurance

Shortly after its landfall, my colleague, Ben Brookes, and I drew attention in the RMS live Harvey updates to the fact that the storm was “not a wind event.” Like Sandy, flood losses, we wrote, would quickly overtake wind losses.

We recalled how Dr. Robert Muir-Wood had insisted back in February 2014 that “water is the new wind.” Those with exposure in harm’s way, he argued, needed to “get to grips with the details of modeling and managing hurricane-driven flood risk.”

It was unsurprising, then, to hear Robert on BBC World News last week describing Hurricane Harvey’s destruction as absolutely avoidable. Yes, Harvey is an extreme event. There were, however, historical precedents for stalling rain storms — and there are clear business cases for investing in resilience before extreme events, rather than just responding after.

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The Role of Catastrophe Risk Finance in Developing Nations

We all know that prevention is better than cure. Trouble is, sometimes you catch a cold. And if you’re already vulnerable, a relatively small infection presents a big risk – especially if you don’t have timely access to sufficient amounts of the necessary medicines.

Despite the best will in the world, nobody can stop the ground from shaking or the wind from blowing. Nobody can say that the worst-case scenario will never happen.

So, when Mother Nature strikes a vulnerable, low-income country, how bad will the ensuing humanitarian crisis likely be? What will it take financially to recover and rebuild? And is there a role for insurance along with donor aid?

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How to Accelerate the Understanding of Disaster Risk

RMS is delighted in playing an integral role at the United Nations’ Global Platform for Disaster Risk Reduction in Cancun next week.  This is the first time that government stakeholders from all 193 member countries have come together on this subject since the Sendai Framework for Disaster Risk Reduction was adopted in March 2015.  Cancun looks forward to welcoming some 5,000 participants.

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A Perennial Debate: Disaster Planning versus Disaster Response

In May we saw a historic first: the World Humanitarian Summit. Held in Istanbul, representatives of 177 states attended. One UN chief summarised its mission thus: “a once-in-a-generation opportunity to set in motion an ambitious and far-reaching agenda to change the way that we alleviate, and most importantly prevent, the suffering of the world’s most vulnerable people.”

And in that sentence we find one of the enduring tensions within the disaster field: between “prevention” and “alleviation.” Between on the one hand reducing disaster risk through resilience-building investments, and on the other reducing suffering and loss through emergency response.

But in a world of constrained political budgets, where should we concentrate our energies and resources: disaster risk reduction or disaster response?

How to Close the Resilience Gap

The Istanbul summit saw a new global network launched to engage business in crisis situations through “pre-positioning supplies, meeting humanitarian needs and providing resources, knowledge and expertise to disaster prevention.” It is, of course, prudent to have stockpiles of humanitarian supplies strategically placed.

But is the dialogue still too focused on response? Could we not have hoped to see a greater emphasis on driving the disaster-resilient behaviours and investments, which reduce the reliance on emergency response in the first place?

Politics & Priorities

“Cost-effectiveness” is a concept with which humanitarian aid and governmental agencies have struggled over many years. But when it comes to building resilience, it is in fact possible to cost-justify the best course of action. After all, the insurance industry, piqued by the dual surprise of Hurricane Andrew and then the Northridge earthquake, has been using stochastic models to quantify and reduce catastrophe risk since the mid-1990s.

Unfortunately risk/reward analyses are rarely straightforward in practice. This is less a failing of the models to accurately characterise complex phenomena, though that certainly is a challenge. It’s more a question of politics.

It is harder for any government to argue that spending scarce public funds on building resilience in advance of a possible disaster is money well spent. By contrast, when disaster strikes and human suffering is writ large across the media, then there is a pressing political imperative to intervene. As a result many agencies sadly allocate more funds to disaster response than to disaster prevention, even though the analytics mostly suggest the opposite would be more beneficial.

A New, Ambitious form of Public Private Partnership

But there are signs that across the different strata of government the mood is changing. The cities of San Francisco and Berkeley, for example, have begun to use catastrophe models to quantify the cost of inaction and thereby drive risk-reducing investments. For San Francisco the focus has been on protecting the city’s economic and social wealth from future sea level rise. In Berkeley, resilience models have been deployed to shore-up critical infrastructure against the threat of earthquakes.

In May, RMS held the first international workshop on how resilience analytics can be used to manage urban resilience. Attended by public officials from several continents the engagement in the topic was very high.

The role of resilience analytics to help design, implement, and measure resilience strategies was emphasized by Arnoldo Kramer, the first Chief Resilience Officer (CRO) of the largest city in the western hemisphere, Mexico City. The workshop discussion went further than just explaining how these models can be used to quantify the potential, risk-adjusted return on investment from resilience initiatives. The group stressed the role of resilience metrics in helping cities finance capital investments in new, protective infrastructure.

Stimulated by commitments under the Sendai Framework to work more closely with the private sector, lower income regions are also increasingly benefiting from such techniques – not just to inform disaster response, but also to finance the reduction of disaster risk in the first place. Indeed there are encouraging signs that these two different worlds are beginning to understand each other better. At the inaugural working group meeting of the Insurance Development Forum in Singapore last month there was a productive dialogue between the UN Development Programme and the risk transfer industry. It was clear that both sides wanted action, not just words.

Such initiatives can only serve to accelerate the incorporation of resilience analytics into existing disaster risk reduction programmes. This may be a once-in-a-generation opportunity to address the shameful gap between the economic costs of natural disasters and the fraction of those costs that are insured.

We cannot prevent natural disasters from happening. But neither can we continue to afford to spend billions of dollars picking up the pieces when they strike. I am hopeful that we will take this opportunity to bring resilience analytics into under-served societies, making them tougher, more resilient, so that when catastrophe strikes, the impact is lessened and societies can bounce back far more readily.

New Risks in Our Interconnected World

Heraclitus taught us more than 2,500 years ago that the only constant is change. And one of the biggest changes in our lifetime is that everything is interconnected. Today, global business is about networks of connections continents apart.

In the past, insurers were called on to protect discrete things: homes, buildings and belongings. While that’s still very much the case, globalization and the rise of the information economy means we are also being called upon to protect things like trading relationships, digital assets, and intellectual property.

Technological progress has led to a seismic change in how we do business. There are many factors driving this change: the rise of new powers like China and India, individual attitudes and even the climate. However, globalization and technology aren’t just symbiotic bedfellows; they are the factor stimulating the greatest change in our societies and economies.

The number, size, and types of networks are growing and will continue to do so. Understanding globalization and modeling interconnectedness is, in my opinion, the key challenge for the next era of risk modeling. I will discuss examples that merit particular attention in future blogs, including:

  • Marine risks: More than 90% of the world’s trade is carried by sea. Seaborne trade has quadrupled in my lifetime and shows no sign of relenting. To manage cargo, hull, and the related marine sublines well, the industry needs to better understand the architecture and the behavior of the global shipping network.
  • Corporate and Government risks: Corporations and public entities are increasingly exposed to networked risks: physical, virtual or in between. The global supply chain, for example, is vulnerable to shocks and disruptions. There are no local events anymore. What can corporations and government entities do to better understand the risks presented by their relationships with critical third parties? What can the insurance industry and the capital markets do to provide CBI coverage responsibly?
  • Cyber risks: This is an area where interconnectedness is crucial.  More of the world’s GDP is tied up in digital networks than in cargo. As Dr. Gordon Woo often says, the cyber threat is persistent and universal. There are a million cyber attacks every minute. How can insurers awash with capital deploy it more confidently to meet a strong demand for cyber coverage?

Globalization is real, extreme, and relentless. Until the Industrial Revolution, the pace of change was very slow. Sure, empires rose and fell. Yes, natural disasters redefined the terrain.

But until relatively recently, virtually all the world’s population worked in agriculture—and only a tiny fraction of the global population were rulers, religious leaders or merchants. So, while the world may actually be less globalized than we perceive it to be, it is undeniable that it is much flatter than it was.

As the world continues to evolve and the megacities in Asia modernize, the risk transfer market could grow tenfold. As emerging economies shift away from a reliance on a government backstops towards a culture of looking to private market solutions, the amount of risk transferred will increase significantly. The question for the insurance industry is whether it is ready to seize the opportunity.

The number, size, and types of networks are growing and will only continue to do so. Protecting this new interconnected world is our biggest challenge—and the biggest opportunity to lead.