baku, june 20, 2013
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Europa Re Value Proposition A brief outline. Riccardo Ciccozzi Accreditation & Representation Specialist. Baku, June 20, 2013. Agenda. Context SEE E xposure to Natural Disasters Natural Disasters’ impact in SEE Catastrophe Insurance Markets Project - PowerPoint PPT PresentationTRANSCRIPT
Baku, June 20, 2013
Europa Re Value PropositionA brief outline
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Riccardo CiccozziAccreditation & Representation Specialist
Agenda
Context
– SEE Exposure to Natural Disasters– Natural Disasters’ impact in SEE– Catastrophe Insurance Markets
Project
– Vision and Market Value preposition– Key services– Main Steps
Challenges ahead
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Major Natural Disasters in South East Europe
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Source: Mitigating the Adverse Financial Effects of Natural Hazards on the Economies of South Eastern EuropeA Study of Disaster Risk Financing OptionsSouth Eastern Europe Disaster Risk Mitigation and Adaptation Programme - Eugene N. Gurenko Wael ZakoutThe World Bank, Sustainable Development Department Europe and Central Asia Region and UN/ISDR secretariat Europe February 2008
SEE High Exposure to Natural Disasters
South East Europe (SEE) is highly vulnerable to natural disasters.
– In the past thirty years, economic losses in excess of $70 billion were reported.
– A major earthquake in Turkey in 1999 caused more than 17,000 deaths and economic damages estimated at 5% of GDP.
– Floods in Central and South East Europe alone in 2002 and 2005 caused economic losses of $15 billion and $2.5 billion, respectively, leaving over 25,000 people homeless.
– In ten of the twenty-eight countries in the region, up to 4 million people are exposed to severe natural catastrophic perils, while up to 32 million (or 7% of the region’s population) can be affected by natural disasters.
Climate Change is expected to worsen the region’s exposure
– Due to the growing volatility of climate, smaller but more frequent events are also becoming a major reason for concern.
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Disaster Risk Reduction & Disaster Risk Financing
Disaster Risk Financing reduces the opportunity cost of disasters (cost of securing funds to sustain a natural disaster)
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Disaster Risk Reduction reduces the expected disaster losses
Catastrophe Insurance Markets – Development Prospects
The growth potential of Cat Property Markets in SEE is therefore very high. For example:Turkey Market
– Turkish Catastrophe Insurance Pool (TCIP) established in 1999– Turkey cat insurance penetration at 25% of insurable stock
Romania Market– Romania Natural Disaster Insurance Pool (PAID) established in 2008– Romania cat insurance penetration at 60% of insurable stock
Success can be achieved through combined efforts of the public and private sectors:
– Support by adequate government policy– Regulatory reform– Consumers’ education– Reliable claims performance– Commercial connection between flood / quake coverage and mortgage loans
This was achieved in Central Europe:– Poland – Cat Insurance Penetration at 55%– Slovakia - Cat Insurance Penetration at 58%– Czech Republic - Cat Insurance Penetration at over 60%– Hungary - Cat Insurance Penetration at over 70% 6
Catastrophe Property Risk Insurance Pools – Examples
Regional (sovereign) catastrophe risk insurance pools – Caribbean Catastrophe Risk Insurance Facility – Pacific Disaster Risk Insurance Program (under development)
National property catastrophe risk insurance pools – Turkish Catastrophe Insurance Pool – California Earthquake Authority – Taiwan Residential Earthquake Insurance Pool – Algeria Catastrophe Risk Insurance Pool – Romanian Natural Disaster Insurance Pool (PAID) – Consorcio de Compensación de Seguros (Spain)– CCR (France)
Etc.
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A variety of tools and approaches are possible
Issue Cat Bonds? Mandatory Insurance? Regional Spread or National Focus?
Nat Cat Risk Regional Exposure
Nat Cat Damage Impact
Private Insurance?
Europa Re Solution
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South East Europe (SEE) is highly vulnerable to natural disasters Climate Change is expected to worsen the region’s exposure
Adverse impacts on governments’ budgets
Socio-economic implications on households
Adverse economic effects on business
Very Low Cat Insurance Penetration
Lack of Risk Awareness
Market Growth Potential
Flood Heat Waves Drought Quake
Market Infrastructures to develop
Catastrophe and Weather Risk Insurance for
Households, SMEs and Farmers
Europa Re - Business Model – Vision & Mission
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A Swiss-based company owned by countries of Southeast Europe (SEE)
Supported by the World Bank, EU, UNISDR, SECO and GEF
Providing innovative technology-driven solutions to SEE insurers writing catastrophe and weather risk insurance products
Vision - Increase the level of catastrophe insurance penetration amongst households, small and medium enterprises (SMEs) and farmers in the SEE region
• Educating consumers• Improving and standardize credit quality of insurance products• Enabling insurers to sell weather and catastrophe risk insurance• Helping governments and insurance regulators
MissionEuropa Re Project
Key Services - Risk Management
Market Issue: lack of high-resolution and reliable catastrophe (cat) models for SEE cat exposures
ERe Solution: provide local insurers with state-of-the-art probabilistic cat modelling tools based on the latest technology offered by Market Leaders
Main Benefits: High-resolution Models available at a much lower cost
ERe’s Cat Models’ technology is underpinned by:
– AIR’s global research in catastrophe risk modelling– Country specific risk data– Unique business applications
ERe’s Risk management systems allow insurers to accurately evaluate:
– Potential losses resulting from catastrophe insured risks at any point in time;– Net retention capacity relative to available solvency. 10
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Real-time monitoring of disaster events and option to receive notifications Reports on disaster risk assessment of their properties/businessesIdentification of major structural vulnerabilities of their propertiesAdvice on possible risk reduction techniquesReferrals to insurance companies accredited under Europa Re programCommunity catastrophe risk assessment and management service
Key Services - CATMonitor
Key Services - What will Europa Re do for Consumers
Government As result:
- Consumers’ profit and assets are better protected
- Higher incentive to produce
Outcome
- Increased production
- Increased income
- Higher contribution to economy
Insurance companies
• Direct subsidies
• Insurance premium subsidies
• Basic Insurance protection
• Specialized Insurance protection
Europa Re
Expertise on improving the
subsidy scheme
New user friendly and affordable
products
Know how
Awareness
Education
Development of distribution channels
New Parametric Insurance Products
Improved market mechanism
Con
sum
ers
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Key Services - What can be expected from ERe products
Products
Simple
Affordable
Easily accessible
Reliable
Covering consumers’ production
needs
Innovative
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Earthquake and Flood insurance for homeowners
and SME’s
Weather insurance
products for agriculture
Other as explored to fit market needs
fast and simplified loss settlements
Remote Sensing & Cat Modelling Technologies
Europa Re Parametric products
1. Precipitation
2. Temperature
Main principle of parametric weather insurance: Coverage in case of unusual behavior of weather
excessiveprecipitation
drought(minimal rainfall)
high heat low heat freeze
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Example: Drought insurance
What triggers an insurance event?
when total amount of
precipitation for the period is below the minimum threshold
What types of thresholds?
1. minimum threshold for
period2. maximum threshold for
period(based on long
term average for period)
What precipitation values are accepted?
daily values of precipitation
measured officially by Authorized
National Weather Service
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Pre-event Post-EventEvent timeline
Geocoding at the time of underwriting
Pre-event Imagery
Exposure data
Protocols
• Claims submission• Assignment• Evaluation in-house or
send adjustors to review
• Phase 3 Claims settled
Phase148-72 hrs
• Imagery data collection • Remote Damage
Assessment • Phase1 Claims settled
Phase 21-2 weeks
• Effectively target adjustors and claims resources
• In-field damage assessment
• Phase 2 Claims settled
Phase 3within weeks
Claims Adjusting and Management
Financial Management
Before/After image comparison
Work Management Documents I Correspondence I
I Contacts I
Litigation Subrogation
Salvage
A new perspective for claimsEvent
Event Monitoring & immediate notification
Main Sequencing Steps
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Platform Testing
Compatibility and proper functioning of the systems
Europa Re Accreditation Sales Certificates
Europa Re Accreditation Claims Reporting Certificates
Europa Re New Products Launch
Education and Promotion
Challenges ahead
Government Involvement:
– To educate, regulate and incentivize
Consumers’ resistance:
– Lack of risk awareness / low trust in private insurance
Insurance Industry Resistance:
– What’s in it for me?
But,
Engage & Innovate Lessons from the Macedonian farmers
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New Legislation and regulations shall be issued in SEE to foster private cat insurance
Promotional activities shall target directly consumers in the region
Local Insurers to enter into formal cooperation with ERe