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					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
Impact of Disasters

Segmentwise Approach

Implementation Roadmap
Impact of Disasters - Property Risks
   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 - Personnel Risk
   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
Worldwide Disasters – Insurance
Contribution
    Year      No of      No of      Total  Insured losses   % Insured
           Catastrophe fatalities  losses     (USD bn)       losses
                s                 (USD bn)
2005           397       97,000      230         83           36%
2006            349            31,000   48       16           33%
2007            335            21,500   70       28           40%
2008            311           246,000   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 Estimated         %
                               economic insurance       Insured
                                                         losses
                              loss ($ mn) loss ($ mn)

Gujarat Cyclone       1999           900         200       22%
Gujarat               2001         2,000         150        8%
Earthquake
Source : floods        2005
MumbaiMarket information           2,500         650       26%


   Low insurance penetration impacting Public
    finances
Funding Disaster Relief
   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
Presentation Path
Impact of Disasters

Segmentwise Approach

Implementation Roadmap
     Risk profiling
                           Severity High

             Typical disaster       Typical disaster
            event profile of non-   event profile of
            disaster prone areas    disaster prone areas

Frequency                                                   Frequency
Low                                                         High
            Disaster events do not have this risk profile




                             Severity Low
     Segment : Property Risks
                               Severity High

             Terrorism Risk          Micro-asset
            Insurance Pool           insurance (Indonesia)
             Fire insurance          Cat Bonds (Japan)
             Nuclear pool
Frequency                                                    Frequency
Low                                                          High




                         Severity Low
Indian Terrorism Pool
   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
Japanese Catastrophe Pool Program
   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
Indonesian micro-asset insurance
   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
Property insurance – Policy Measures
   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
     Segment : Personnel / Agricultural
     Risks
                            Severity High

             Accidental           Central American
            Risks                 Government
                                  securitization scheme

Frequency                                                 Frequency
Low                                                       High
                                    Health insurance
                                  risks (RSBY /
                                  Aarogyashree)
                                   Weather insurance


                           Severity Low
Weather Insurance
    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
Central American Govt. Securitization
   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
Personnel Insurance – Policy
Measures
 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
Presentation Path
Impact of Disasters

Segmentwise Approach

Implementation Roadmap
Key enablers
   Product Innovation
   Enrollment a key challenge given the dispersion
    of insured members
     Smartcard based technology providing a
      breakthrough
     Policy measures to encourage insurance through
      paperless technology
   Efficient 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

				
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