Swiss Re in deal with Alabama State Insurance Fund to cover for hurricane exposure
Montgomery, Alabama - Swiss Re today announced a historic agreement with the Alabama (USA) State Insurance Fund (“SIF”), to provide a three-year parametric insurance cover for the SIF’s primary catastrophic hurricane exposure. Parametric solutions compensate the buyer based on the physical characteristics of a disaster. The payment can be used for any purpose, including emergency response costs, replacing lost tax revenue and funding of increased insurance costs.
This agreement marks the first time a US state government has utilized such an innovative solution to transfer its financial exposure from natural catastrophes to the private sector. This is a critical step in dealing with the potentially massive costs associated with natural disasters.
"We are pleased to work with Alabama’s State Insurance Fund to help them with their risk management needs through this first-of-its-kind program,” said Raj Singh, Member of Executive Committee and Chief Risk Officer at Swiss Re. "Until now, governments, and ultimately taxpayers, have been left shouldering the burden of paying for emergency expenses and reconstruction well after the disaster has passed. In other countries, we have worked successfully with government bodies to address this exposure. These innovative solutions are applicable to governments of all sizes and can be applied to US states who have an economic exposure to catastrophes - whether they be hurricanes, wildfires, or earthquakes among others.”
Ben Spillers, Risk Manager, Alabama Department of Finance added: “This transaction marks a milestone for the State of Alabama in identifying and managing key risks. Based simply on the wind speed of a hurricane, we can now receive funds rapidly to cover our immediate costs. Our responsibility to protect the citizens of Alabama led us to work with an industry leader like Swiss Re, who has significant experience working with government entities.”
Swiss Re has a long, successful history of providing governments, international development banks and non-governmental organisations with tailor-made, innovative risk transfer solutions to help them cope with the financial consequences of major catastrophic events.
In 2009, Swiss Re worked with Mexico’s Ministry of Finance and the World Bank to develop the MultiCat Mexico program, providing USD 290 million of coverage for earthquakes and hurricanes. The insurance coverage provides Mexico emergency funds after a major disaster, helping the government address the post-disaster needs of its citizens.
Swiss Re is also the lead reinsurer of the Caribbean Catastrophe Risk Insurance Facility (CCRIF), the first parametric insurance solution covering several regional Caribbean governments. In a demonstration of the capabilities of parametric solutions, the CCRIF’s policy for Haiti was triggered following the earthquake in January 2010, delivering the Haitian government much needed emergency funds shortly after the disaster.
With the closing of the State Insurance Fund transaction, the government of Alabama has demonstrated that similar solutions may be deployed to cover the risks of disasters in the United States and beyond.
Notes to editors
Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 20 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “A+“ by Standard & Poor’s, “A1” by Moody’s and “A” by A.M. Best.