Education can unleash the power of ILS
How can ILS conquer less-developed markets?
Developing countries have a low insurance penetration for several reasons. First, it’s a serious undercapitalisation of local markets, so there is a minimal insurance sector engagement for large natural catastrophes at the macro level (the recent Turkey earthquake and Pakistan floods are perfect examples).
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There are initiatives ranging from multilateral agencies such as the World Bank, UNDP, and regional development banks trying to increase awareness of local governments in parametric products and other alternative risk transfer options, to our Fundamentals of ILS course. So far, we are the only executive education and certification programme focusing on ILS. Since our launch in Autumn 2021 we have taught more than 80 students across 35 countries.
What is ILS’s potential?
It has big potential in emerging markets. For too long, poor countries become poorer through no fault of their own. If they understood risk transfer better, and had people advising them, at least some of this risk could be transferred away.
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Regulators and insurers in many developing countries think that ILS is extremely complex. However, this comes from a lack of understanding. With a proper educational effort, the introduction of ILS and alternative risk transfer products could speed up the closure of a growing protection gap very efficiently.
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