Hurricane and Disaster Insurance

Hurricane and Disaster Insurance FDIC Rural Finance Seminar May 23, 2008 Joseph B. Cole, Ph.D. Managing Director RenRe Investment Managers Ltd Renaissance Re (RNR) Organizational Structure Renaissance Re (NYSE: RNR) Property/CAT Risk Specialty Risk Individual Risk Ventures Weather Predict Consulting RenRe Investment Managers (RIM) 2 Weather Predict Consulting (WPC) Expertise to Quantify Risk WPC Science Team WeatherPredict Global and Climate Modeling, Super Ensemble Forecasting Long-range Climate Forecasting Short-range Global Weather Forecasting Agricultural / Energy Analysis and Forecasting Real-Time Tropical Cyclone Forecasting  Meteorology  Oceanography  Climate Science  Wind Engineering  Aerodynamics  Computer Simulation Accurate Environmental Forecasting Oceanographic and Tropical Modeling Expertise High-resolution, multiple nested Tropical Cyclone (TC) modeling Seasonal Atlantic Index Forecasts Footprint model for land-falling TCs State-of-the-art Oceanic Eddy Forecasting Consulting Partnerships  Environmental Mapping 3 Wind Vulnerability Modeling Mitigation Technology Dynamic Tropical Cyclone Modeling    Numerical Weather Prediction (NWP)  Computer simulation of the atmospheric physics Proprietary NWP models based on NHC’s GFDL Hurricane Forecast System  Movable nested grid  Improved physics  Coupled oceanatmosphere  Worldwide coverage Leading skill in TC track/intensity forecasting 4 Super EnsembleTM Weather Forecasting Technology Forecasts are produced by atmospheric models run by various meteorological agencies Real Time Tropical Cyclone Modeling Satellite Photo of Typhoon Wipha (9/18/07) Typhoon Wipha Example All AFGI and JTWI forecast tracks Forecasts made Mon 17 September 00 GMT Typhoon Wipha Example MPCI Growth in the United States 9 Market Structure by Segment, Participant and Policy Type 10 Key Factors for Risk Indexation  Easy to Understand     Rainfall Temperature (CDD, HDD, GDD) Soil Moisture Hurricane Landfall Intensity  Verifiable   Represents Value of Risk Independently Replicable  Competitively Determined   No price fixing No governmental interference or intervention   Frequent Price Dissemination Lack of Hedging Alternatives 11 Comparative Analysis of Soybean Crop Insurance Risks 12 Comparative Analysis of Soybean Crop Insurance Risks 13 Potential Crop Risk Management Policies in China Dalian Commodity Exchange Corn and Soybeans Zhengzhou Commodity Exchange Wheat and Rapeseed Oil 14 Potential Disaster Risk Insurance Policies in China  Producer Indemnity Contracts     Premium subsidies similar to other countries Yield based Record keeping integrity Potential for Revenue based contracts  Provincial Risk Management      Disclosure of rating methodologies Indemnity based reinsurance Indexed or Parametric reinsurance potential Area Yield, Weather or Revenue based Access to historical yield data  Agribusiness Risk Management   Area yield or revenue based insurance Sold through Chinese crop insurers with international reinsurance support  National Catastrophe Risk Policies    Property/Catastrophe insurance Disaster cost recovery Risk mitigation initiatives 15