To mobilise catastrophe insurance capacity in Southeast Asia, Seadrif's Benedikt Signer must first help insurers and governments understand each other's perspectives, he tells David Walker
Benedikt Signer could add to his professional title, as executive director of the Singapore-licensed underwriter Seadrif Insurance Company, the role of 'translator'.
This is because, to achieve Seadrif's goal of providing insurance and risk management solutions against climate shocks and natural disasters to its eight member countries, Signer and his team must translate the languages of two very different worlds.
Technical risk terms – such as loss and combined ratios and exceedance probabilities – are familiar to insurance actuaries, but a foreign language to many politicians considering buying cover.
Similarly, public budgeting, a pivotal consideration for governments, is another world to underwriters.
Seadrif – in full, the Southeast Asia Disaster Risk Insurance Facility – helps each community better understand the other, says Signer. It plays a role as a trusted intermediary, linking up governments and insurers and assisting with risk modelling and other advisory services.
"It's definitely a learning experience that comes with exposure – on both sides," Signer says. For government employees, talking of a payout profile for a '1-in-15' or '1-in-30' event means nothing. But comparing it to what happened after previous disasters "created a different understanding, which made sense to people who have dealt with such things. It is about simplifying information in the product."
The organisation also operates the Seadrif Insurance Company, which Signer leads, to cover risk directly. Since 2021 it has underwritten a flood policy for Laos, with parametric and "finite" components, the latter offering financing for costs resulting from events that do not trigger a payout under the strictly objective rules of the parametric component.
Eight nations currently participate in Seadrif: Cambodia, Indonesia, Japan, Laos, Myanmar, Philippines, Singapore and Vietnam.
Meeting of minds
Signer was already 'translating' before joining Seadrif in 2023, when he worked at the World Bank helping governments understand their risk financing needs. Speaking the language of governments helps to build their trust in insurance products, which Signer says is crucial to assigning budgets internally and for convincing decision-makers to buy cover.
"If you are used, as a reinsurer and actuary, to dealing with insurers that speak your language and immediately understand what you're talking about...it's hard to transition and speak to someone who does not have that [understanding], and to know their comfort and trust."
A programme can be wonderfully designed and technically perfect, Signer says, but the technicalities of its payout trigger need to be grasped to avoid any misalignment of expectations after disaster strikes.
Trusted bridges
Seadrif is a non-profit, publicly-owned entity, "whose profits flow back into the profit share, or build treasury capital, while market counterparts get a single, qualified counterpart as an entry point".
It's not there to supplant private insurers, Signer emphasises.
"By intent and objective we are not meant to be a competitor to the private sector. Both in reality, and by perception, we do not want private markets to think Seadrif is set up as a state-owned enterprise to undercut the private market on price. That is not the point, it would not be impactful or sensible.
"The question for us is not how to maximise underwriting profits, but how to maximise the protection countries are getting. Our KPI is not writing as much risk as possible, it is facilitating protection. We have public money to make a market work better, and you have to ask what makes a market work better in each geography."
A varied role
Sometimes Seadrif may fulfil a "fronting role", educate governments or help them structure and place programmes competitively. Seadrif prefers not simply to connect people, Signer explains, to avoid perceptions of being "market-distorting or 'picking winners', but we look at how to take risk and reinsure it out."
The requirements vary by member country. Some may not have a lot of money, whereas in others such as the Philippines and Indonesia, capital is not the issue. In those countries, "we need a different rationale for our activities: can we get a regional pooling of infrastructure programmes, to bring down premiums...which makes the price more justifiable for governments?
But we would always rely on private capacity to back us."
Persistent protection gap
One commonality across the region Signer observes is the widening protection gap. Swiss Re estimated the total protection gap facing Asia Pacific's emerging nations in 2023 at $740bn, a doubling since 2013 to represent nearly half the world's $1.8trn cover shortfall. This is set to continue growing as the developing Apac economies invest in infrastructure and mitigation of climate change.
Signer says "the vast majority" of public infrastructure is publicly funded, so uninsured "and unless the behaviour trend changes, I do not see the protection gap closing".
But he emphasises the gap will "only close through private sector involvement...not because governments insure through Seadrif – we will just be a small part of closing the gap".
He points to "a huge role" for the region's domestic insurance industry. "It's easy to focus on the global reinsurance markets and their capacity, but it will not be the behemoths that change this overall. We also need to focus on developing local industry capacity. Building a strong domestic protection base will be critical."
Helping hands
Seadrif draws on and welcomes assistance from various risk advisors, brokers, modellers and a panel of global reinsurers.
"Many global reinsurance markets are already involved, including from Europe, Asia, Japan and the US. And we are working closely to increase capacity especially within Asia," Signer says.
Close partnerships stretch back to Seadrif's establishment, when the trigger platform for the first Laos flood policy was developed by Deltares, a hydraulic engineering institute in the Netherlands, the European Space Agency and flood risk modelling firm JBA Risk Management, among others.
The result was "one of the first platforms to push boundaries by using more real-time measurements from ground and satellite, to estimate people affected by flooding".
Designing appropriate products for emerging nations can still present challenges, though.
The model developed in 2017 for Laos's flood risk was optimised for slow-moving riverine flooding, but performed less well for small, more localised events and flash floods. Signer acknowledges "lower-return period flooding is harder to cover with satellites," which may cross Laos only once every six days. Scarcity of terrestrial sensors made getting ground measurements difficult.
"Much progress has been made, but the fundamental challenge still persists of how to get good flood modelling in data-scarce countries," he says.
He adds that Seadrif is working to expand the scope of natcat-related risks it covers. For instance, it is partnering with the UN Food and Agriculture Organization and six Asean countries to explore establishing a Southeast Asia Agricultural Risk Finance Facility, given over one-third of Southeast Asia's workforce gets their livelihoods from farming, and the sector contributes over 10% of the region's GDP.
Words of advice
Signer has a welcome – and advice – for re/insurers considering working in Seadrif's member countries. Doing so can be "highly diversifying to European or Japanese business, and represents "quite capital-efficient growth," he says.
But he counsels "a certain amount of patience" in developing business. "It can take six to 12 months for deals to close, rather than four to six weeks, and that has an additional cost attached. It is important to look at this as long-term relationship business, not be deterred. We hope entities like us help to bring the cost down and create a more competitive market.
"There is a lot of long-term growth ahead, but one needs to think...smartly...about setting up programmes and embedding insurance."
Does disaster insurance "work"?
Benedikt Signer describes many facets to assessing whether natcat insurance that governments buy has "worked".
"You look at how the money is used, how it flows through the system and who the beneficiaries are. An insurance solution can 'work well' – but not for a disaster because it may pay out in three days but the money then sits in a treasury pool.
"In a sense the paying out in itself doesn't matter, because it requires a lot more than just the financial engineering to make a difference.
"The lived experience [of insurance claims] is no different with governments" than for individual claimants, Signer adds. "If you have had to fight for a payout and have paid out-of-pocket expenses, you will not buy the product again".
But when countries see Seadrif's parametric flood cover for Laos paying out $4.5m so far, after disasters, it proves the concept works. "That is what builds trust."