Global reinsurance company Hannover Re sees an opportunity to further develop the integration of resiliency features within catastrophe bonds, having received positive feedback from the market and clients since the transaction for the North Carolina Insurance Underwriting Association (NCIUA), Executive Board Member Silke Sehm has told Artemis.Speaking with us prior to the annual Monte Carlo Rendez-vous de Septembre reinsurance event, Sehm explained that interest in embedding disaster-resilience features into the catastrophe bond structure is high., thanks to the assistance of Hannover Re.In fact, the NCIUA’s $600 million transaction was the very first cat bond to include an additional resilience feature.

That deal demonstrated the successful integration of the cat bond with the so-called resilience bond concept, neatly within one reinsurance capital market arrangement facilitated by Hannover Re.Speaking with Artemis, Silke Sehm of Hannover Re explained, “We believe that resiliency features create value for all stakeholders in the ILS market while addressing the fundamental challenge of rising catastrophe losses.” She added that, “This is very interesting for us, and we plan to develop it further as we have received positive interest and feedback by clients.” In fact, Hannover Re has been in talks with clients about similar arrangements, that embed comparable disaster resilience within the catastrophe bond structure.Wind risk is seen as an obvious category, but Hannover Re is also seeing interest in relation to other perils and sees wildfires, earthquakes, or floods as potential catastrophe bond candidates where financing of preventative measures could be successfully implemented, to help fund prevention measures.

Sehm told us that the reinsurance company is convinced of the concept and open to developing it further with its clients and the insurance-linked securities (ILS) market.“Reinsurance works best in connection with preventative measures that effectively help reduce disaster costs.By building a resiliency feature into a cat bond, we’ve created something entirely new – a capital market instrument that actively reduces the risks it’s designed to cover,” Sehm told Artemis.

The NCIUA transaction saw the first cat bond where disaster-resilience was embedded, to provide not only returns to its investors, or claims payments to cedants, but also as a way of providing funding to fortify roofs and therefore to improve building resilience in the case of storms.Gina Hardy, CEO, North Carolina Insurance Underwriting Association, also spoke with us and said, “Our primary goal is building a Stronger Storm Ready North Carolina.The recent cat bond with an integrated resiliency feature advances that mission, helping us strengthen communities and reaffirming our commitment to protecting policyholders.

“Our ‘Strengthen Your Roof’ program has proven highly effective.Fortified roofs demonstrably reduce losses, and this cat bond structure provides sustainable funding to expand these efforts on a much larger scale.“We believe resilience enhanced structures represent the future of catastrophe risk management.

We welcome the opportunity to share our experience with other insurers facing similar challenges.” ..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.