role of insurers & reinsurers in achieving the objectives of national policy on disaster...
TRANSCRIPT
Role of Insurers & Reinsurers in achieving the objectives of National Policy on Disaster Management
Embedding insurance products into Disaster Management Policy
August 11, 2010
Presentation Path
Segmentwise ApproachSegmentwise Approach
Impact of Disasters
Implementation RoadmapImplementation Roadmap
Industrial Risks Loss or damage to Fixed Assets like
Buildings, Plant & Machinery, Furniture & Fixture, etc
Loss or damage to stock in godowns, in transit and at manufacturing sites, etc
Consequential losses Non-Industrial Risks
Loss or damage to Household property, Motor Vehicles, Shops, Offices, Hotels, Educational Institutes, etc
Impact of Disasters - Property Risks
Death or permanent disability Loss of earning capability for self &
family Loss of Health
Temporary : Fracture, injury, etc or outbreak of diseases post catastrophes
Chronic : Exposures to toxic materials leading to chronic illness
Unemployment Agricultural risks
Crop Livestock
Impact of Disasters - Personnel Risk
Worldwide Disasters – Insurance Contribution
Year No of Catastroph
es
No of fataliti
es
Total losses
(USD bn)
Insured losses
(USD bn)
% Insured losses
2005 397 97,000
230 83 36%
2006 349 31,000
48 16 33%
2007 335 21,500
70 28 40%
2008 311 246,00
0
269 52 19%
2009 288 15,000
62 26 42%
Source : Swiss Re Sigma
The proportion of insured losses in underdeveloped and developing Economies tends to be even lower
Disasters in India – Insurance Contribution
Catastrophe Year Estimated
economic loss ($
mn)
Estimated
insurance
loss ($ mn)
% Insure
d losses
Gujarat Cyclone 1999 900 200 22%
Gujarat Earthquake
2001 2,000 150 8%
Mumbai floods 2005 2,500 650 26% Low insurance penetration impacting Public finances
Source : Market information
Government Relief Funds Various forms of local and international
aid Pooling arrangements
Partly subsidized by Government Insurance / Reinsurance Alternative Risk Transfer solutions
Index based instruments
Funding Disaster Relief
Presentation Path
Segmentwise Approach
Impact of DisastersImpact of Disasters
Implementation RoadmapImplementation Roadmap
Risk profiling
Typical disaster event profile of non-disaster prone areas
Disaster events do not have this risk profile
Typical disaster event profile of disaster prone areas
Severity Low
Severity High
Frequency Low
Frequency High
Segment : Property Risks
Terrorism Risk Insurance Pool Fire insurance Nuclear pool
Micro-asset insurance (Indonesia) Cat Bonds (Japan)
Severity Low
Severity High
Frequency Low
Frequency High
Target Segment Insuring population
Perils Covered Terrorism
Managed by GIC Coverage
Property Sum Insured subject to maximum liability as defined in the pool agreement
Risk transfer through voluntary domestic reinsurance and international reinsurance
Indian Terrorism Pool
Target Segment Householders
Perils Covered Earthquake, Volcanoes, Tsunami
Managed by Government Coverage
30-50% of SI for Fire subject to maximum of 60 Mn Yen per risk (equi. INR 32 Mn)
Various percentages of claim amount payable by the Government depending on the size of claim
Risk transfer through Cat Bonds
Japanese Catastrophe Pool Program
Target Segment Low income households
Perils covered Floods
Managed by Insurance Company backed by International reinsurers
One Manggarai Protection Card costs 50,000 Indonesian Rupiah(IDR) (equi. INR 260) and guarantees a one-off payment of IDR 250,000 (equi. INR 1300) if waters rise to or above 950 cm at the Manggarai Water gate in Jakarta
Indonesian micro-asset insurance
Significant underinsurance prevalent Corporate
Lower sum insured taken by choice with consequential losses largely not insured
Adequacy of insurance verified through Audit certification
Personal lines Significant under penetration – for e.g. in
home insurance and shopkeeper insurance Quantification through Registration
authorities, Property / Municipal tax authorities, Home Loan data
Control through Banks and registration authorities
Property insurance – Policy Measures
Segment : Personnel / Agricultural Risks
Accidental Risks
Health insurance risks (RSBY / Aarogyashree) Weather insurance
Central American Government securitization scheme
Severity Low
Severity High
Frequency Low
Frequency High
Target Segment Indian Farmers
Perils Covered Rainfall Deficit
Managed By Governments with Indian Insurers
Coverage Index based trigger - benefit policy Quick release of funds thereby
providing speedy relief Mandatory for loanee farmers
Weather Insurance
Target Segment Central American Government
Perils Covered Earthquake
Managed By Reinsurance major
Coverage details Payout based on the size of the population
affected by a specific earthquake For example, $1 million of donations or
government funds can be used to secure contingent disaster relief funds in the amount of $45 million
Risk transfer to capital markets through securitization
Central American Govt. Securitization
Government subsidy for Weather insurance and life & health coverage of BPL population
Measures for exposure evaluation collection of data on population
density modeling its vulnerability in various
disaster event scenarios Agriculture risks
Crop underinsurance evaluated through Government land records and loanee farmers
Personnel Insurance – Policy Measures
Presentation Path
Segmentwise ApproachSegmentwise Approach
Impact of DisastersImpact of Disasters
Implementation Roadmap
Key enablersProduct InnovationEnrollment a key challenge given the
dispersion of insured members Smartcard based technology providing a
breakthrough Policy measures to encourage insurance
through paperless technologyEfficient servicing of insurance
scheme Ability to collect, store and use data
through intelligent data mining techniques
Government efforts at building infrastructure for better risk management Risk Zoning of Areas
Thank you