Reinsurance Review by rt3463df

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									  CRESTA Earthquake Zones
ICLR Hazards Earthquake Zones
   OSFI Default Loss Estimates


               September, 2004


               Keith Fillmore
          Senior Vice President
             Aon Re Canada


           Proprietary & Confidential
                                      Outline


     CRESTA
           What is CRESTA
           Who is CRESTA
           Why CRESTA
           Brief History of CRESTA
           Canadian CRESTA Zones
           Revision of CRESTA Earthquake Zones in 2003
           CRESTA MAPS



     ICLR Hazard Zones
           Reason For Development
           HAZARD MAPS


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    Proprietary & Confidential
                                     Outline


     Default Loss Estimates         ( DLE's)
           What are DLE’s
           Why DLE’s
           Use of DLE’s
           Revision of DLE’s 2004




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                                 Who / What is CRESTA




     From CRESTA . org “ CRESTA promotes the accurate and
        efficient assessment and control of liabilities arising from the
        insurance and reinsurance of natural perils”

     CRESTA began in late 1970’s after “Tropical Cyclone Tracey”
        hit Darwin Australia
           Group of insurers and reinsurers



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                                 Who / What is CRESTA


     There are CRESTA zones for any country exposed to Natural
        Perils Losses

     Canadian CRESTA Zones developed in 1986
     CRESTA Accumulation reporting is at the Aggregate Level
        and continues to be the main way for Insurers to report
        aggregates to reinsurers

     In some countries (not Canada) insurers report these on a
        quarterly basis

     For Canada, CRESTA usually adopts any changes
        recommended by the Reinsurance Research Council




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                                 Why CRESTA


     Tropical Cyclone Tracey produced large losses to pro rata
        treaties, insurers and reinsurers realized that Cat loss
        potential was greater than they had previously believed

     Reinsurers needed a standard method to estimate their own
        exposures

     Today many Canadian insurers provide reinsurers with policy
        level data but there are still some insurers who struggle to
        provide this resolution of data

     In the US policy level is the de factio standard but outside
        North America aggregates are still the most common data
        resolution




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    Proprietary & Confidential
                            Canadian CRESTA Zones




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     2003 Update of the CRESTA Earthquake Zones

     In order to update the Catastrophe Risk Evaluating and
       Standardizing Target Accumulation (CRESTA) zones, the
       Insurance Bureau of Canada and the Reinsurance Research
       Council formed a joint committee.

     A scenario approach defined areas where a single seismic event
       would have roughly the same damage ratios.

     Soil conditions, past seismic activity, and shifts in population
       density (ie. Creation of new FSAs) and building construction
       information updates, helped to create the new updated CRESTA
       maps.




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                         Old CRESTA Earthquake Zones


    Region      Zone                    Nam e                                         FSAs
                       1 Richmond, Fraser Delta              V3M, V4G, V4K, V6V-Y, V7A-E
                       2 Rest of Greater Vancouver           Rest of V3, V4, V5, V6, V7
      Western




                       3 Victoria                            V8N-Z, V9A-E
                                                             V8A, V8L, V9L-Y, V2P-Z, V0M-S, V0X, V1M, V4W, V4X,
                       4 Rest of Vancouver Earth             V4R, V3G
                   11 British Columbia (excl. 1 – 4)         Remainder of the V Codes
                       5 Montreal                            H
                       6 Greater Montreal                    J3V-Z, J4, J5R, J6W-Z, J7A-R, J0N
                       7 Surroundings of Montreal            J2S-X, J3A-L, J5Y-Z, J6A-T, J7V-Z, J0J-L, J0P-S
                                                             G8Y-Z, G9A-C, J1E-X, J2B-N, J3P-R, J5V, J8C-H, J0C-H,
      Eastern




                       8 Rest of Montreal Earth              J0T-V, K6A-K, K0B-C
                       9 Quebec City and Epicentral Region   G1, G2, G5V, G6V-W, G0A, G0L, G0R, G0T
                                                             G5L-R, G5Y, G6G-T, G7, G8B-H, G8T-Z, G9, G0K, G0M-P,
                   10 Rest of Quebec Earth                   G0S, G0V, G0X-Z
                   15 Ontario                                Remainder of the K Codes and L, M, N, P
                   16 Quebec (excl. 5-10)                    Remainder of the G, H, J Codes




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                        New CRESTA Earthquake Zones

           Region        Zone                    Nam e                                      FSAs
                        W1      West Extreme                     V3C, V3K, V3W, V4G, V6V
                                                                 V3R, V3V, V3L, V3M, V3N, V3S, V3T, V4C, V4E, V4K, V4N,
                        W2      West Very High                   V6W, V6X
                                                                 V1M, V2X, V2Y, V3B, V3H, V3J, V3X, V3Y, V4A, V4L, V4R,
                        W3      West High                        V5E, V5H, V6Y, V7A, V7B, V7C, V7E
              Western

                                                                 V2W, V2Z, V3A, V3E, V4B, V4P, V5A, V5B, V5C, V5G, V5J,
                                                                 V5K, V5M, V5N, V5P, V5R, V5S, V5T, V5W, V5X, V5Z, V6A,
                        W4      West Moderate                    V6B, V7H, V7J, V7P
                                                                 V2S, V2T, V2V, V4M, V4W, V4X, V5L, V5V, V5Y, V6C, V6E,
                                                                 V6G, V6H, V6J, V6K, V6L, V6M, V6N, V6P, V6R, V6S, V6T,
                        W5      West Low                         V6Z, V7G, V7K, V7L, V7M, V7N, V7R, V7T
                             11 West Very Low (BC excl. W1-W5)   Remainder of the V Codes
                        E1      East Extreme                     H2Z, H3A, H4P, H4S, H4Y, H5B, H9P, H9S
                                                                 H2L, H2X, H2Y, H3B, H3N, H3R, H3S, H3T, H3W, H3X, H3Z,
                                                                 H4A, H4B, H4L, H4M, H4T, H4V, H4W, H4X, H4Z, H5A, H8R,
                        E2      East Very High                   H8S, H9R, J6J, J6K
                                                                 H0A, H1A, H1G, H1H, H1J, H1T, H1V, H1W, H1Y, H1Z, H2A,
                                                                 H2B, H2C, H2E, H2G, H2H, H2J, H2K, H2M, H2N, H2P, H2R,
                                                                 H2S, H2T, H2V, H2W, H3C, H3E, H3G, H3H, H3J, H3K, H3L,
                                                                 H3M, H3P, H3V, H3Y, H4C, H4E, H4G, H4H, H4J, H4K, H4N,
              Eastern




                        E3      East High                        H4R, H7A, H7G, H7L, H7R, H7S, H7T,
                                                                 H1B, H1E, H1K, H1L, H1M, H1N, H1P, H1R, H1S, H1X, H7B,
                                                                 H7C, H7E, H7H, H7J, H7K, H7M, H7N, H7P, H7Y, H9E, J0L, J0N,
                                                                 J2W, J2X, J2Y, J3A, J3B, J3E, J3G, J3L, J3N, J3X, J3Z, J5Z,
                                                                 J6A, J6S, J6T, J6V, J6W, J6X, J6Y, J7A, J7C, J7G, J7H, J7J,
                        E4      East Moderate                    J7K, J7L, J7N, J7T,
                                                                 H0M, H1C, J0H, J0J, J0P, J0S, J2N, J2S, J2T, J3H, J3M, J3R,
                        E5      East Low                         J5J, J5M, J5W, J5X, J5Y, J6E, J7X, J7Y, J7Z, J8H, K6A
                             15 Ontario Very Low                 Remainder of the K Codes and L, M, N, P
                             16 Quebec Very Low (excl. E1-E5)    Remainder of the G, H, J Codes



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                                  CRESTA   #FSAs    2001 Population    2001 Dw ellings
                                  1            11           220,609              83,199
                                  2            76          1,630,651            653,450
                                  3            14           262,168             120,674
                                  4            34           793,438             341,413
                                  11           53          1,000,872            445,233
                                  Total       188          3,907,738          1,643,969




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                                                   CRESTA   #FSAs     2001 Population     2001 Dw ellings
                                                  W1             5              174,183             56,633
                                                  W2            13              366,989            135,175
                                                  W3            18              459,013            174,162
                                                  W4            26              542,861            212,234
                                                  W5            30              531,763            237,374
                                                  11            96            1,832,929            828,391
                                                  Total         188           3,907,738           1,643,969




      *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.
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                                                       CRESTA    #FSAs    2001 Population    2001 Dw ellings
                                                      1              11           220,609              83,199
                                                      2              76          1,630,651            653,450
                                                      3              14           262,168             120,674
                                                      4              34           793,438             341,413
                                                      11             53          1,000,872            445,233
                                                      Total         188          3,907,738          1,643,969




      *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.
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                                   CRESTA   #FSAs    2001 Population     2001 Dw ellings
                                  W1            5              174,183             56,633
                                  W2            13             366,989            135,175
                                  W3            18             459,013            174,162
                                  W4            26             542,861            212,234
                                  W5            30             531,763            237,374
                                  11            96           1,832,929            828,391
                                  Total        188           3,907,738           1,643,969




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CRESTA #FSAs 2001 Population 2001 Dw ellings
5          120       2,155,728       979,646
6           40         765,621       300,149
7           30         901,431       388,354
8           43         799,034       392,150
9           37         776,688       369,429
10          48         731,822       319,938
15         512      11,268,993      4,497,264
16          86       1,213,590       522,582
Total      916      18,612,907      7,769,512




          *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.
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CRESTA #FSAs 2001 Population 2001 Dw ellings
E1           8          34,740        15,968
E2          26         451,929       208,952
E3          95       1,816,674       805,624
E4          52       1,110,686       443,081
E5          22         430,848       183,638
16         206       3,526,345      1,628,596
15         513      11,276,303      4,500,577
Total      922      18,647,525      7,786,436




         *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.
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ICLR Earthquake Hazards Zones




          Proprietary & Confidential
                                  ICLR Hazard Zones


      Developed primarily for insurers
      Funding provided by Insurance Bureau of Canada and
         Reinsurance Research Council

      Used CanadaQuake     to simulate over 100,000 earthquake and
         develop Annual Loss Cost for each FSA

      6 Zones in each area (West = British Columbia, and East is
         Ontario and Quebec )
            Extreme, Very High, Moderate, Low, Very Low
            These are not same Loss Cost in West and East

      Paper “Earthquake Hazard Zones- The relative risk of damage
         to Canadian buildings” available at iclr.org


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                     Hazard Zones – Counts by FSA

                       West Hazard Zones   # of FSAs      %
                             HW1               13       6.91%
                             HW2                4       2.13%
                             HW3               12       6.38%
                             HW4               60      31.91%
                             HW5               51      27.13%
                             HW6               48      25.53%
                             Total            188      100.00%

                       East Hazard Zones   # of FSAs      %
                              HE1             107      12.00%
                              HE2             100      11.21%
                              HE3             136      15.25%
                              HE4              42       4.71%
                              HE5              40       4.48%
                              HE6             467      52.35%
                             Total            892      100.00%


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OSFI Default Loss Estimates




         Proprietary & Confidential
                         OSFI Default Loss Estimates

      What are DLE’s
            Earthquake and Fire Following PML percentage for each earthquake CRESTA
                zone
            Developed in 1997
            Used RMS, EQE and Munich Re model to create PMLs
            Very conservative PMLs



      Why DLE’s
            OSFI needed some standard measurement of potential earthquake losses for
                insurers
                       Used for all insurers
                       Especially important for insurers that do not model their earthquake exposures

      Use of DLE’s
            Insurers use own aggregates to produce DLE PMLs which are compared to
                Modeled PMLs

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                         OSFI Default Loss Estimates


      Revision of DLE’s for 2004
            IBC currently updating average PMLs for Munich Re, RMS and EQE
                models as models have changed considerably since 1997 and
                CRESTA zones just changed
            Bases of DLEs may be New CRESTA Zones or New Hazard Zones




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The END




Proprietary & Confidential

								
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