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Catastrophic Risk and InsuranceCatastrophic Risk and InsuranceHurricane and hydrometeorological risksHurricane and hydrometeorological risks
ASSAL XVII Annual MeetingVII Conference Insurance Regulation / Supervision Latin America
Lisbon, Portugal, April 24 – 28, 2006
Dr. Sebastian Aschenbrenner-von Dahlen (BaFin) Member of the IAIS Reinsurance Transparency Group International Association of Insurance Supervisors (IAIS)
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Introduction / Introduction / IntroducciónIntroducción // IntroduçãoIntrodução
¡Estimados señoras y señores!
Perdónenme que mi presentación sea en inglés. Mis escasos cononcimientos del español y portugués me permiten solamente decirles que pueden sentirse dichosos de que me estoy limitando a esta sola página.¡Muchas gracias!
Estimados senhoras e senhores,
Peço desculpa por proferir a minha conferência somente em língua inglesa, mas os meus escassos conhecimentos das línguas portuguesa e espanhola são apenas suficientes para lhes comunicar que se podem considerar felizes que agora acabo por continuar a falar apenas em língua inglesa.Muito obrigado!
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Hurricane KatrinaHurricane Katrina 2005 2005
Importance of reinsurance coverage
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Insurance supervision and catastrophesInsurance supervision and catastrophes
Today’s content
• Background concerning IAIS• Storm and flood impact within
ASSAL• Role of National Supervisors /
A brief case study• IAIS Global Reinsurance
Market Report
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Importance of the IAISImportance of the IAIS
IAIS Mandate• Standards and guidance for insurance
supervision
• Assist national supervisors
• Promote cooperation among insurance supervisors
• Coordinate with other financial sector and international organizations (Basel Committee, IOSCO, Joint Forum, Financial Stability Forum, etc.)
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Structure of the IAISStructure of the IAIS
IAIS and Reinsurance Transparency
Secretariat
Budget Committee
…
…
…
Reinsurance and Other Forms of Risk Transfer Subcommittee
Reinsurance Transparency Group (RTG) …
Executive Committee
Association in General Meeting
…
Technical Committee
…
…
…
…
Implementation Committee
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Hurricane and hydrometeorological risksHurricane and hydrometeorological risks
Storm impact within ASSAL in 2005
• Emily: Mexico, and Gulf (July) € 200m insured loss, € 450m total damage
• Stan: Mexico, and Guatemala (October) € 150m insured loss, € 2.4bn total damage
• Wilma: Mexico, Jamaica, Haiti (October) € 8bn insured loss, € 16bn total damage
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Hurricane and hydrometeorological risksHurricane and hydrometeorological risks
Flood impact within ASSAL in 2005
• Venezuela, Colombia (February) Heavy rain: > 100 dead, ~ € 50m damage
• Brazil, Guatemala, and El Salvador (June) Landslides: > 80 dead, > 2000 homeless
• Colombia (September until November) Mudslide: > 100 dead, > 180 000 damaged houses
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Global perspectiveGlobal perspective
• 10 largest insured losses
8 storms (6 hurricanes)
• Occurred since 1990 5 hurricanes in 2004 and 2005
Ivan, Charley; Katrina, Rita, Wilma
Katrina: largest insured event ever
~ € 50bn insured losses
~ € 120bn total damage
Importance of hurricanes
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Role of National SupervisorsRole of National Supervisors
Insurance and Reinsurance
• Katrina proved that the (re-)insurance industry is ready to bear very large losses
• Insurance Supervisors play an important role in the context of catastrophic risks
Appropriate coverage for primary insurers
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Brief case study for National Supervisors Brief case study for National Supervisors
Order of events during the case study
• Read and answer the case (3 minutes)– Everybody receives one case study (A or B)– Each case study describes one insurer – Read it (identical text in three languages)– Answer the question (one) at your case study
• Presentations (1 minute each)– Each case (A and B) shall be presented by one
person.
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Case Study …Case Study …
… all participants are solving their case
• Case A ( = Insurance company “A”)
or
• Case B ( = Insurance company “B”)
Good luck!
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Case Study – Solution ACase Study – Solution A
Insurance Company “A” ( = case A)
• Description of insurer “A”– “A” is a medium sized insurer, with a focus on
potentially catastrophe affected business – “A” bought only quota share reinsurance
• Solution – Buy not only quota share but also excess of
loss reinsurance coverage!
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Case Study – Background information ACase Study – Background information A
Quota share treaty
0
20
40
60
80
100
120
140
160
Risk A Risk B Risk C
Insurer's share (70% ) Reinsurer's share (30% )
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Case Study – Solution BCase Study – Solution B
Insurance Company B ( = case B)
• Description of insurer “B”– “B” is a medium sized insurer, with a focus on potentially
catastrophe affected business – “B” bought its reinsurance protection only at one reinsurer
“RCB”; “RCB” is a weak company
• Solution – “Do not put all eggs into one basket”
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
Case Study – Background information BCase Study – Background information B
Diversification and financial strength
• Reinsurance protection should be bought at – Strong, and financially healthy reinsurers– More than one reinsurer (“eggs in the basket”)
• Judgments concerning financial strength– Home supervisors– Rating agencies– Capital market indicators
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
IAIS Reinsurance Transparency GroupIAIS Reinsurance Transparency Group
Global Reinsurance Market Report
• Strong capital base of reinsurers
• “Hurricane Katrina losses are not expected to have a material impact on the reinsurance sectors overall capital position” (cf. p. 12)
*Brackets indicate number of reporting reinsurers from each jurisdiction (cf. p. 48 of the Global Reinsurance Market Report 2004)
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April 2006
Dr. Sebastian Aschenbrenner-von Dahlen
IAIS – Catastrophic Risk and Insurance: Hurricane and Hydrometerological Risks
International Association of Insurance Supervisors (IAIS)International Association of Insurance Supervisors (IAIS)
A source for questions und answers
www.iaisweb.org
IAIS source for the Global Reinsurance Market Report: http://www.iaisweb.org/051215_RTG_report_final_2.pdf
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