EXPERIENCE OF THE NATIONAL POOLS IN CATASTROPHE RE/INSURANCE
Nat Cat INSURANCE GAP 2017 ■ USD 330 billion – global economic losses ■ USD 139 billion – global insured losses Protection ■ Nat Cat = 98% of the gap catastrophe economic losses in USD 162 2017 billion … of which Weather related >92%
Nat Cat losses still mostly uninsured Over the last decade – USD 2.03 trillion global Nat Cat losses – ~ 70% uninsured Along with the intensive urbanization and increase in assets, both global Nat Cat losses and the insured losses increased … BUT the gap remained unchanged in relative terms
How to reduce Which risk? Which risk? Which risk? Who carries the risk? Who carries the risk? Who carries the risk? Risk transfer solution Risk transfer solution Risk transfer solution the protection Public physical Public physical assets assets gap? Macro Macro Risk transfer solutions Risk transfer solutions Governments Governments Governments for (sub)sovereigns to cover for (sub)sovereigns to cover their direct or indirect costs their direct or indirect costs Emergency Emergency response costs response costs Protection gap Protection gap Protection gap Pools & traditional Pools & traditional Foregone revenue Foregone revenue products products Businesses, Businesses, Businesses, Insurance schemes and pools Insurance schemes and pools homeowners, homeowners, homeowners, Strong social protection role to increase insurance to increase insurance farmers farmers farmers Uninsured private Uninsured private penetration, and to offer penetration, and to offer efficient reinsurance efficient reinsurance assets assets • Availability protection protection • Affordability • Reliable Micro Micro • Simple to understand Simplified products distributed Simplified products distributed Livelihood Livelihood Individuals Individuals Individuals via aggregators such as via aggregators such as assistance assistance MFIs, NGOs, and corporates MFIs, NGOs, and corporates
Experience of the National al Pools in catas astrophe reinsuran ance 3 examples:
Experience of the National al Pools in catas astrophe reinsuran ance
the biggest single territory Nat Cat Mandatory Mandatory Voluntary Voluntary The PAD policy The PAD policy reinsuran ance MANDATORY buyer in the VOLUNTARY Law nr. 260/2008 on Regular fire insurance policies, compulsory home CEE insurance against with selected NatCat perils earthquakes, landslides coverage included and floods Voluntary policies may be bought ONLY if there is a PAD policy issued for the same property
Landslides Earthquakes Floods Three risks: Vrancea – main seismogenic Approx. 30% of the national About 800,000 ha and 50,000 zone, responsible for over 90% territory exposed to the floods household exposed to of all earthquakes in Romania, risk landslides releasing over 95% of the seismic energy Current penetration rate is ~19%. - 1.7 million homes Coverage: first loss basis; no deductible Fixed rates – depending on the construction type: Type A: policy limit of EUR 20,000 per dwelling /premium EUR 20 Type B: policy limit of EUR 10,000 per dwelling /premium EUR 10
1,703,047 1,693,006 1,590,954 1,491,329 32.34 32.01 29.81 28.25 Portfolio development 736,318 574,229 2010-2017: 13.44 331,131 367,282 8.17 Number of policies 6.9 5.46 GWP (EUR million) 2010 2011 2012 2013 2014 2015 2016 2017 10% 24.57 Portfolio development 8% 7.73 2010-2017: 16.19 6% Loss ratio 10.04 4% Net Assets + Cat Reserve 3.62 3.47 (EUR million) 5.33 4.96 4.73 4.57 4.67 2% 2.03 1.29 1.13 0.55 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
the biggest single territory Nat Cat Reinsurance capacity (mil. EUR) reinsuran ance 1000 900 900 800 800 buyer in the 700 600 600 525 Capacity 500 450 CEE 400 300 300 200 200 100 100 0 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 The biggest cost for PAID – reinsurance being the main “core” of PAID business
the biggest single territory Region by Signed Capacity Nat Cat Asia 5% 7% 13% reinsuran ance Bermuda 27% Current RI programme capacity Europe 900.000.000 mil euro 48% buyer in the UK Current number of reinsurers US 68 CEE Current capacity split by rating (S&P) Region by no. of reinsurers PAID reinsurers by written capacity Asia € 40 - 70m € 70m + AA- Bermuda 16% 10% 10% A+ 9% 8% Europe 45% A 37% UK < € 20m + € 20 – 40 m 31% A- 34% US
Experience of the National al Pools in catas astrophe reinsuran ance
History The devastating Earthquakes in Marmara region in1999 Insured loss: around USD 800 million Economic loss: over USD 10 billion Low insurance penetration (especially for residential risks) Burden on public budget Decree law – compulsory earthquake insurance
Legal al & finan ancial HOUSEHOLDERS RISK MANAGEMENT BEHAVIOUR base Financed by Marmara Earthquake Emergency Reconstruction Project co-financed by Turkish Government DASK World Bank European Bank for Reconstruction TREASURY MANAGEMENT COMPANY and Development Decree law no 587 – compulsory earthquake insurance as of 27th September 2000. INSURERS AUTHORITIES Eureko Sigorta is tendered for the LEGAL FRAMEWORK, SALES SUPERVISION, OPERATION following 5 years till August, 2020 ESTABLISHING CHECK POINTS, RISK MANAGEMENT DISASTER SUPPORT As from 18th August 2012 new 6305 MANAGEMENT Catastrophe Insurance Law
Singular arity & Product concept Singularity Simplicity Line Property Peril Earthquake SCOPE OF COVER Single Only Earthquake and following Risk Residential buildings ₋ Fires Provider DASK ₋ Explosions ₋ Landslides ₋ Tsunami Product features Simplicity INSURABLE PROPERTY ₋ Only Building Understanding Only earthquake ₋ No contents ₋ No BI Acces All Channels Simple Pricing 3 pricing factors SIMPLE TARIFF ₋ Earthquake Zone Few information requirements Click product ₋ Construction Type P ost-sales Just call 125 ₋ M² of apartment
In Brief INCREASED SUSTAINED LOW IMPROVED STRONG PUBLIC AWARNESS PRICES PENETRATION RESERVES LESS THAN OVER OVER FROM US$ 33 1.6 BILLION 90% 4% TO 48% US$ ANNUAL PREMIUM BRAND AND PRODUCT RECOGNITION EFFECTIVE PUBLIC-PRIVATE- RELEASE ON LOW OPERATIONAL MARKET PARTNERHIP STRUCTURE NATIONAL BUDGET COST DEVELOPER 2 ND LOB US$ 4.5 BILLION HAS BECOME LESS THAN 8.4 7 .2 2% A GLOBAL MILLION E ARTHQUAKE HOMEOWNER CLAIM PAYMENT MILLION CAPACITY ROLE MODEL POLICIES The maximum sum insured is EUR 25,400 in 2018
Growth 15% 9,000 CAGR 8,400 8,284 7,628 8,000 7,231 7,5% CAGR 6,808 7,000 6,029 6,000 1% CAGR 4,786 5,000 . 000 3,725 4,000 3,435 3,316 2,844 2,618 2,555 3,000 2,428 2,417 2,128 2,090 2,022 2,000 1,000 - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 HOMEOWNERS DASK
Reinsuran ance Snap apshot Gross reinsurance premium Since inception TCIP has paid more than EUR 750 3.5 million in gross adjusted premiums to reinsurers 3 Reinsurance fund and retension Loss information 2.5 No losses to the reinsurance program since inception 2 The most recent major earthquake, in October, 1.5 2011, caused EUR 15 million of loss to TCIP, 1 significantly below the attachment point of the program 0.5 Sum insured by TCIP Countrywide Sum Insured by TCIP as of August 2018: more than EUR 93 billion Modelling High quality and extended exposure data available Earthquake risk in Turkey modelled in RMS Fund (EUR) Retention (EUR) Reinsurance Capacity (EUR)
Reinsuran ance structure 2018 Rapid growth pushes TCIP to buy additional capacity Multiple layers program: a. Own retention b. Traditional reinsurance program covered by top quality reinsurers (Munich Re, 3.00 B EUR Swiss Re, Hannover Re etc.) 2. DİLİM DEVLET 10% c. Insurance Linked Securities 2.00 B EUR Bosphorus Ltd– reinsurance 1. DİLİM vehicle in Bermuda named MUNICH RE 875 M EUR d. State – last resort reinsurer 800 M EUR SWISS RE Great interest for diversifiers 750 M EUR DASK KONSERVASYON TCIP takes higher portion of the 600 M EUR SPREAD LOSS reinsurance capacity in the market 350 M EUR DASK KONSERVASYON
Experience of the National al Pools in catas astrophe reinsuran ance
A solution to provide Solution to A reinsurance / Authorised Owned by Life span a long- pool solution by the UK the insurance of 25 affordab ability standing regulators industry. years problem Accountable to Parliament to flood insuran ance PURPOSE: to promote and enable the availability and affordability of flood insurance for eligible homes manage over its lifetime the transition to an affordable market for household flood insurance where prices reflect the risks of flooding
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