Protecting public assets and liabilities

Our client, a county in California, is a qualified self-insured entity burdened with over USD 1 billion of workers’ compensation (WC) liabilities on its balance sheet. When employers decide to self-insure their WC reserves, they expose themselves to uncertainties, statutory constraints, and capital charges. The county was looking for a solution to reduce their exposure to their oldest WC liabilities while also making sure that their current and past employees continue to be provided with the same high level of service. In 2024, our client received board approval to transact.

With the approved budget in place, the county was able to bring roughly USD 50 million of retained WC liabilities to the market via two tranches with their broker, Gallagher Re. Through a loss portfolio transfer (LPT), the county's self-insured retention of WC exposures was transferred to Swiss Re. By purchasing a special excess policy, Our client was able to discharge their continuing obligations as a self-insurer to pay compensation or to secure the payment of compensation.

The island of Puerto Rico is subject to numerous threats from natural hazards, especially hurricanes and earthquakes. In 2017, Hurricanes Irma and Maria hit Puerto Rico, causing massive losses and leaving residents without electricity. In 2020, another earthquake left parts of the island without electricity again. Our client, a state-owned enterprise responsible for the electricity power generation and distribution in Puerto Rico, suffered considerable economic losses. The government of Puerto Rico is required to purchase insurance protection as a prerequisite for receiving disaster assistance from the U.S. Federal Emergency Management Authority (FEMA). 

Swiss Re developed a parametric ‘cat-in-a-box’ structure with hazard triggers designed to support multiple perils (i.e., magnitude, location and depth for earthquakes, and wind speed and location for tropical cyclones). This parametric insurance solution was intended to complement the existing traditional indemnity insurance policies in place and to provide additional protection against economic losses and coverage of previously excluded assets (i.e., transmission and distribution lines) in the event of an earthquake or a tropical cyclone. In other words, the parametric component provides immediate liquidity after an event, whilst the indemnity programme enables reconstruction of impacted assets. 

Learn more about this earthquake and tropical cyclone cover.

Reinsurance support, led by Swiss Re, is now in place to launch the Fire Safety Reinsurance Facility (the Facility) from 1 April 2024, in an industry intervention to help improve the availability of insurance for certain buildings with combustible cladding and other fire safety issues.

The facility has been established by (re)insurance broker McGill and Partners with extensive support from the Association of British Insurers (ABI). It has two key intentions - to expand capacity for insurers already writing business for affected buildings and to encourage competition across the market so that more firms will provide cover. The ultimate solution remains the urgent need for works to take place to make buildings safe and resilient. The Facility is expected to run for three to five years whilst this happens.

Learn more about the UK Fire Safety Reinsurance Facility here.

¹ Hallegatte, Stephane; Rentschler, Jun; Rozenberg, Julie. 2019. Lifelines: The Resilient Infrastructure Opportunity. Washington, DC: World Bank. https://hdl.handle.net/10986/31805