SWISS Reinsurance Co, the world's largest reinsurer, has said it was in talks with four Asian governments about insurance contracts to provide funds for rapid relief after natural disasters.
This month's earthquake in China and the cyclone in Myanmar may encourage governments and aid agencies to buy policies that fill funding gaps in responding to catastrophes and crop failures with quick aid payments, according to Reto Schnarwiler, head of public sector business development at Zurich-based Swiss Re.
"There's a change in mindset at the government level because they recognize that we have the expertise to assess risk and come up with solutions," Schnarwiler told Bloomberg News. "But as these solutions are still new, they're not yet fully aware of what's available."
Schnarwiler declined to say which governments Swiss Re was in discussions with.
The United Nations, which will need to feed 5 million people the next time rains fail in Ethiopia, is also among potential clients, the company said. Drought in Ethiopia can mean emergency aid worth about US$200 million is needed rapidly to stave off hunger.
The UN's World Food Program, which usually gets emergency funds from governments, is interested in policies that trigger quick payments of as much as 12 times the premium.
Insurers such as Swiss Re see a potentially profitable new market. After the Indian Ocean tsunami in December, 2004, there was "little or no insurance coverage," despite 225,000 deaths in 11 countries and billions of dollars of damage, Schnarwiler said.
"That made us realize we need to play a more active role," he said.
Myanmar's May 2 tropical cyclone left more than 130,000 people dead or missing, while China's earthquake on May 12, its strongest in more than half a century, had killed 68,516 people as of yesterday.
Skeptics say although insurance can offer faster payments than traditional fund-raising campaigns, it would do little to solve the immense logistical problems involved.
"This is a neat concept tying risk management to food aid that could provide speedy funding," said Jeremy Loveless, a consultant with 15 years of experience advising the UN, Red Cross and aid agencies such as Oxfam.
"But in practice, it doesn't address the practical difficulties of distributing any payout," Jeremy said.