"IIF 2018 - PROPERTY INSURANCE - the NatCat challenge and beyond" Conference: Main conclusions

23 March 2018 — Alexandru CIUNCAN
The "IIF 2018 - PROPERTY INSURANCE - the NatCat challenge and beyond", taking place on Friday, 23 March, in Prague, brought into debate the NatCat insurance gap, but also the newly developed aspects of the manmade property risks.

The event also focused on the role that the latest technologies may play in helping the industry to deal with the current and future challenges, thus better serving its customers.

During "IIF 2018 - PROPERTY INSURANCE - the NatCat challenge and beyond", the participants had the opportunity to share relevant experiences regarding property insurance and NatCat risks, find out more about the latest digital innovations impacting the property insurance segment, discover how the latest technologies may help the industry to deal with the current and future challenges, benefit from the successful experiences of key industry experts and prepare for the technological reshape of the property insurance industry.

The conference gathered well-known international speakers, representing companies such as SWISS Re, FLOOD Re, SWISS Re, PERILS and AON Benfield.

"IIF 2018 - PROPERTY INSURANCE - the NatCat challenge and beyond" was organized by XPRIMM with the support of IIS - International Insurance Society and PAID Romania.

Main conclusions:

Pavel HUERTA-URIBE - Expert Property EMEA Business Generation Director | Property & Specialty Underwriting SWISS Re, Swizerland

- The total economic losses from NatCat losses increased globally in recent years

- Global natural catastrophe losses totalled 2,03 trillion over the last decade, with 70% uninsured

- Catastrophe models estimate the global annual uninsured losses from future natural disaster events to be 153 billon USD

- Technology will influence the personal lines property insurance industry and hopefully help with client engagement

- There are certain innovative products that SWISS Re brings to the market

- In example, parametric products that provide earthquake cover to SME in South Eastern Europe will offer swift payout in order to ensure business continuity and a swift payout based on regional shaking intensity

Nicoleta RADU - Director General, PAID Romania

- Romania is by far one of the most exposed country in Europe to NatCat risks. The country has 3 major hazards that can appear as single perils or as one, as a consequence of another: earthquake, floods and landscapes

- 1.570 died and 11.300 people were injured by the 1977 Romanian earthquake. After this, building standards were severely enforced

- Currently, in Romania there are 8,93 million dwellings, out of which 76% are located in urban settlements

- PAID was initially a project initiated by The World Bank which became a law. PAID was established in 2009, while the first policy was issued in 2010

- Since the beginning of its activity, PAID obtained a 450% increase in the business. The company closed 2017 with 1,7 million mandatory policies, while in the country there were 1,3 million facultative policies

- The combined ratio of PAID portfolio decreased by 65% since 2010. All profits have remained within the company.

- PAID is also the largest single territory buyer of reinsurance in the CEE, having a 71% higher protection than the level required under Solvency II

- The company is now working towards the implementation of an operational solution for the effective and timely payments to its clients in case of a major NatCat event, basically a Mass Claims Plan.

- For 2018, PAID has several main goals, such as the strengthening even further the own funds, finding solutions for the increase of the mandatory insurance penetration and maintaining an adequate reinsurance protection of at least 1:200 RTP according to RMS Model etc.

Laurent MONTADOR - Deputy Chief Executive Officer, CCR - Caisse Centrale de Reassurance

- The French market has a specific NatCat regime set-up in 1982, which is a partnership between the State and insurance companies.

- Currently, 12% of the overall property insurance premiums are for covering the NatCat risk.

- This percentage has been calculated and decided depending on possibility of future events in 1982, when we did not have a lot of data available to us

- This framework allowed for certain uninsurable risks to become insurable

- The French Government has set-up different working groups that discuss the potential improvements of this framework (discussing topics such as the level of risk acceptance, i.e.)

- When policies are mandatory, they are are seen by the public as a tax and... nobody likes to pay taxes


- In 2007, the UK saw a 3 billion pound loss due to floods

- FLOOD Re is a joint between the UK insurance industry and the State.

- It is about promoting the availability and affordability of flood insurance for residential buildings

- FLOOD Re is designed as a finite solution that has a life span of 25 years and hence will cease to exist in 2039

- The company is not changing the customer experience in any way, as the primary insurer interacts with the customer directly. FLOOD Re just collects the premiums from primary insurers

- FLOOD Re currently has 142.000 policies that were passed on to us. 93% of people can now get 5 or more quotes so there is so much more availability but also affordability.

Aysun YILDIZ OZER - Deputy Secretary General, TSB-Turkish Insurers' Association

- Before setting TCIP - the Turkish Natural Catastrophe Insurance Pool, we had a reactive reaction to earthquake. There were obstacles to provide insurance to some categories of population. This is the way the earthquake insurance became compulsory, to an affordable price.

- The system was created according to the Turkey conditions by examining the examples from the world, like USA-California and New Zealand

- The project was financed by Marmara Earthquake Emergency Reconstruction Project, co-financed by Turkish Government, the World Bank and European Bank for Reconstruction and Development

- The premium is very affordable - less than 33 USD / year. The operational costs are very low - below 2%. A low cost product is critical for long term survival

- The penetration degree improved to 48% (8.4 million policies). After 2012, the new law introduced several check and control points for the TCIP policy - at electricity, water and gas subscription. The objective is to grow the penetration degree up to 10 million policies, through the effective use of the check points.

- Rapid growth pushes TCIP to buy additional reinsurance capacity. The Cat Country Traditional Capacity available in the market is exhausting, this is why TCIP has a great interest for diversifiers

- Since being in place, TCIP paid over 48 mil. USD in claims

- To overcome the prejudices regarding insurance, all the stakeholders have to work together.

Calin RANGU - Director, ASF-Financial Supervision Authority, Romania

- Climate change is advertising for the concept of risk. So, insurers just have to promote their products

- Digitalisation is changing the way the insurance is seen. People's expectations are changing and the insurance industry has to keep up.

- Insurance is also moving from prevention generally, to an individualisation of risk

- Soon, clients will be able to buy cover for a storm, as they have seen it coming, and just for some days.

Dr. Eduard HELD, PERILS AG, Switzerland

- Our data are used by the key stakeholders to validate their models

- We can facilitate alternative risks transfer, cat-bonds etc., that use our data and index

- We are very useful to the modeling industry and for those who develop models, our data are really needed to improve the stability of the models

- More data allow for better models - we should make it better

Miroslav HRNCIR - Cat Modelling Analyst, Guy Carpenter

- Models are about simplification

- They should be implemented correctly

- The purpose determines whether the model is fit or not

- Catastrophe model is an extension of the historical event scenario methods - to cover a wide range of events in comparable realism

- Even the most evaluated models today can be inaccurate

- The catastrophes are too complex to be exactly evaluated -  we need to do our best and to increase prediction

- The models create a certain discipline in the industry, a common understanding to compare, increase consistency when it comes to loss concentration and exposure

- Rating agencies also use the models when granting the ratings

- In some cases, multiple models can be used to assess the risk and exposure

- Models are tools by creating a history that never happened

- The fundamental of our industry is underwriting - the underwriter should be empowered in these complex days

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