Transcript 08_0108 QBE Powerpoint Template

Reinsurance and other Risk Transfer Mechanisms
National Policy on Disaster Management
IRDA,NDMA and FICCI
11th August 2010
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Agenda
• Disaster Risk financing : Availability of Reinsurance support
• Alternative Risk Transfer : Development of Insurance linked securities,
Insurance linked warranties and CAT bonds for managing risks
• Partnership for risk transfer and financing formation of natural
catastrophe pool
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Concerns
• How should the cover be priced?
• How should the Sum Insured be selected?
• How should the claims be determined and paid?
• Will international reinsurance support be available for such a large scale
cover?
• Will the Government be willing to subsidize the premium and give tax
breaks?
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Challenges
• CAT : Super CAT
• Historical data : not good enough anymore
• Economic losses : Insured losses
• Benefit : Indemnity
• Indemnity based mindset; slow to recognize climate change as a
factor
• Micro : Big Ticket
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Challenges
• Lessons from US and China
• Going beyond physical assets
• Man made : AOG
• ‘Activism’ : Insurance Industry
• Reactive : Proactive
• Solvency of insurers/pools : Risk Based Capital
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Implications of Climate change
• The most direct risk to insurers from climate change is that the
probabilities of loss are changing quickly
• Not easy to identify by looking at extreme events themselves, given the
low frequency
• Looking at the global weather scene, noteworthy that great disasters
appear in clusters
Source : CII (UK)
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Great Weather catastrophes 1950-2009
Source:Munich Re
Implications of Climate change
• Chart shows one year in three the costs are 50% higher than the trend
line
• Given this trend, it seems very likely that there will be a ‘peak’ year that
will record costs of over USD 1 trillion before 2040
• With so much development taking place in coastal zones, the figures
may achieve considerably before 2040
Source : CII (UK)
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Way forward
• How should the cover be priced?
• District wise Average Annual Loss from pre-calculated peril matrices to
determine exposure
• Analysis of historical data keeping in mind today's economic value/s
• Greenhouse Factor
• How should the Sum Insured be selected?
• Low insurance penetration and density implies coverage for a few
• Coverage based on benefit, to start with, instead of indemnity. Helps pricing as
well
• How should the claims be determined and paid?
• Linkage to UID or Government verification
• Micro insurance model to reach the grass roots
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Way forward
• Will international reinsurance support be available for such a large scale
cover?
• Best practices from other markets can be adopted to suit Indian needs. E.g.• Turkish Catastrophic Insurance pool
• FONDEN Of Mexico
• Caribbean Catastrophe Risk Insurance Facility
• The Indonesian Earthquake Reinsurance Pool
• Will the Government be willing to subsidize the premium and give tax
breaks?
• There needs to be legislation, regulations and incentives to ensure that
insurance is used to share the burden of disaster relief
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Way forward
• Other steps
• Separate CAT reserve for companies?
• Public Private partnership?
• Consider widening Terrorism pool to cover other perils?
• Cooperation with international reinsurers?
• Regional pooling?
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Not a Child’s play!
• Z:\Temp1\simcitysocietiesthedisasterswww.wmv
Thank you