The second part of the REINSURING NATCAT RISKS Conference taking place at FIAR 2018 focused on the best solutions for closing the NatCat insurance gap. Christian KREUTZER, Head Market Underwriting CEE, Swiss Re Europe, and Evgeny POTOKOV, Senior Underwriter South Eastern Europe, SCOR Global P&C Deutschland were among the speakers that joined the debates.
Menekse UCAROGLU, President of the Board, IUC (Turkey)XPRIMM Circle of Debates
- After the earthquakes in 1999 from the Marmara region in Turkey, significant damages were reported - the economic damages exceeded 10 billion USD.
- TCIP - the Turkish Catastrophe Insurance Pool is a non-profit organization, which is run by a management company from the market - it is currently run by EUREKO Sigorta.
- All the aspects (reinsurance, fund management, claim, IT, PR) of TCIP are done by the management company of TCIP.
- All companies are selling the TCIP policies - there are 31 companies on the Turkish insurance market, selling them through over 16,000 agents.
- The annual premium is about 30 USD. The penetration rate went from 4% to 48% (in 17 years). 90% of the public is aware of the existence of this product. The operational cost is very low, less than 2%. 4.5 billion USD payment capacity, backed by Government protection, reinsurers and the companies.
- The highest penetration is in the Marmara region (58%) - 3.4 million policies are active in the region.
- 2017, with all the hurricanes and earthquakes around the globe, showed us that the insurance gap is a global matter.
- Insured losses in 2017 totaled USD 144 billion. Only Harvey, Irma and Maria accounted for USD 92 billion
- 2017, a very substantial year of losses for the reinsurance market and the second costliest event year ever.
- PAID Romania can follow Turkey's example, with the checkpoint in electricity bills etc. for the mandatory housing insurance.
- One important aspect of parametric insurance is technology. How can you reach out to a large consumer base in a relatively short period of time? Parametric insurance products are fast, flexible and affordable.
- Fire Insurance is still a luxury product in many countries of CEE - only wealthy people buy reasonable insurance cover. You can have fantastic, sophisticated products: if people don't want to buy them, they will not be a success. It is crucial to increase people's awareness regarding the existence of these products.
- In case of a major Nat Cat Event citizens still expect compensations from the State.
- Protection in place is not always adequate (Risk Definition, PML Error).
- Used Nat Cat Models in the market deviate significantly from each other. The question is: which model to use? There are some insurance companies who use the cheapest models, but this good be not a good solution.
- Possible solutions to reduce the insurance protection gap:
- To increase Risk Awareness of population (e.g. targeted marketing campaigns by Insurance Industry & Governments)
- To buy reasonable (re)insurance protection (Solvency II, Risk Modelling etc.)
- Effective use of data (risk analytics, modelling) and technology (e.g. IT systems) - new technologies and products.
- Long-term improvement of original data and used Nat Cat Models
Christian KREUTZER, Head Market Underwriting CEE, Swiss Re Europe
- Climate change certainly has an impact all over the world: when you look at the global scale - you see an increased frequency in medium sized, local events, which can still be very devastating for the economies. Empirical data does not give us enough information regarding such events. Data is a key issue for making sure that insurance products are able to cover such risks.
- Parametric insurance could be a solution for the Romanian market. When it comes to certain risks, we are in a position to measure perils at very detailed level. However, when it comes to other risks, before creating new insurance products, we need more data.
- I think the most important aspect that led to the success of the TCIP is the IT structure: this is a crucial aspect. As things are getting bigger and bigger and you have more and more data, if you have a good IT structure, you can cope with everything. You need to have a professional IT structure from the very beginning. I would suggest PAID Romania to check the TCIP system and to adapt it to Romania.
- We are selling something which is not possible to see: reinsurance and insurance, which are based on trust.
- The wrong data in technology will bring the wrong outcome.
- There are many catastrophic events today which can happen combined in one year (or even in the same day).
- The agent needs to be very well equipped to explain to the insured persons that the insurance policy is something that can help them.
- I don't think there is a huge technology gap between the Western and Eastern worlds - when it comes to online buying, for example.
- Insurance is a complex product, people still need a person in front of them to buy insurance.