Tag Archives: World Economic Forum

Global Risks for 2019? Or a Retrospective of the Risks of 2018?

The World Economic Forum (WEF) Global Risk Report was released a week ago, in time to generate discussion and provoke debate at the WEF Annual Meeting in Davos.

Among the headlines of the Global Risk Report, as in every annual update, there are two lists of the top five risks for 2019, according to their expected Likelihood and Impact. These lists are based on the WEF Global Risks Perception Survey conducted four months ago, with around a thousand responses from the WEF’s multi-stakeholder communities, professional networks of its Advisory Board, and members of the Institute of Risk Management.

There is a sense about these top five lists, that they are reactive – reflecting what has recently happened, more than being an effective and objective analysis of risk. We know that the most dangerous events are precisely those which one has not recently witnessed and that arrive as something of a surprise.

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Shaping Insurance Portfolios to Manage High Risk from Natural Disasters

In its recent “Global Risks Report”, the World Economic Forum (WEF) provided a comprehensive analysis of the risks and threats that the world faces, from economic, environmental, to geopolitical. Now in its thirteenth report, each year it publishes tables of the top ten risks in terms of their likelihood of happening, and potential impact. Although “newer” risks such as cyberattacks and data fraud do feature in the top five in terms of likelihood, it is extreme weather events and natural disasters that are in the top two or three in each list. In fact, in the view of the WEF, only weapons of mass destruction are ahead of extreme weather and natural disasters in terms of their impact on the globe. Nat cat events have not always topped the table — maybe the scale of the events of 2017 have brought the impact of nat cats to the fore.

There is also a recognition from the WEF that the failure to adapt and mitigate to climate change is rising as a threat. The World Weather Attribution coalition of scientists stated that 19 trillion gallons of rainfall from Hurricane Harvey that hit the Houston area was three-times more likely to occur due to climate change, and 15 percent more intense.

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Fighting Emerging Pandemics With Catastrophe Bonds

By Dr. Gordon Woo, catastrophe risk expert

When a fire breaks out in a city, there needs to be a prompt firefighting response to contain the fire and prevent it from spreading. The outbreak of a major fire is the wrong time to hold discussions on the pay of firefighters, to raise money for the fire service, or to consider fire insurance. It is too late.

Like fire, infectious disease spreads at an exponential rate. On March 21, 2014, an outbreak of Ebola was confirmed in Guinea. In April, it would have cost a modest sum of $5 million to control the disease, according to the World Health Organization (WHO). In July, the cost of control had reached $100 million; by October, it had ballooned to $1 billion. Ebola acts both as a serial killer and loan shark. If money is not made available rapidly to deal with an outbreak, many more will suffer and die, and yet more money will be extorted from reluctant donors.

Photo credits: Flickr/©afreecom/Idrissa Soumaré

An Australian nurse, Brett Adamson, working for Médecins Sans Frontières (MSF), summed up the frustration of medical aid workers in West Africa, “Seeing the continued failure of the world to respond fast enough to the current situation I can only assume I will see worse. And this I truly dread”

One of the greatest financial investments that can be made is for the control of emerging pandemic disease. The return can be enormous: one dollar spent early can save twenty dollars or more later. Yet the Ebola crisis of 2014 was marked by unseemly haggling by governments over the failure of others to contribute their fair share to the Ebola effort. The World Bank has learned the crucial risk management lesson: finance needs to be put in place now for a future emerging pandemic.

At the World Economic Forum held in Davos between January 21-24, 2015, the World Bank president, Jim Yong Kim, himself a physician, outlined a plan to create a global fund that would issue bonds to finance important pandemic-fighting measures, such as training healthcare workers in advance. The involvement of the private sector is a key element in this strategy. Capital markets can force governments and NGOs to be more effective in pandemic preparedness. Already, RMS has had discussions with the START network of NGOs over the issuance of emerging pandemic bonds to fund preparedness. One of their brave volunteers, Pauline Cafferkey, has just recovered from contracting Ebola in Sierra Leone.

The market potential for pandemic bonds is considerable; there is a large volume of socially responsible capital to be invested in these bonds, as well as many companies wishing to hedge pandemic risks.

RMS has unique experience is this area. Our LifeRisks models are the only stochastic excess mortality models to have been used in a 144A transaction, and we have undertaken the risk analyses for all 144A excess mortality capital markets transactions issued since the 2009 (swine) flu pandemic.

Excess mortality (XSM) bonds modeled by RMS  
Vita Capital IV Ltd 2010
Kortis Capital Ltd 2010
Vita Capital IV Ltd. (Series V and VI) 2011
Vita Capital V 2012
Mythen Re Ltd. (Series 2012-2)XSM modeled by RMS 2012
Atlas IX Capital Limited (Series 2013-1) 2013

With this unique experience, RMS is best placed to undertake the risk analysis for this new developing market, which some insiders believe has the potential to grow bigger than the natural catastrophe bond market.