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Risk in Insurance India

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					      ROLE OF INSURANCE IN
    CATASTROPHE RISKS - INDIA

 Hazard Identification
 Risk Assessment

 Risk Prevention

 Mitigation
                      PC James
                      Executive Director
                            IRDA
           IRDA MISSION
   Policyholder Protection
   Speedy & Orderly Growth of the
    Industry
   Promote High Standards
   Customer to be informed/advised
   Customer Service/Grievance Redressal
   Promote fairness & transparency
   Encourage Self - Regulation
CURRENT INITIATIVES OF
        IRDA

 Micro – Insurance
 Health Insurance

 Intermediary Development

 Detariffing

 Catastrophe Risks
KEY ASPECTS OF FINANCIAL
     VULNERABILITY
   Catastrophe Risk Exposures
   Insurance penetration
   Size of the country
   Diversification/concentration of
    economic activities
    (geographically)
INSURANCE AS INSTRUMENT
 OF STRATEGIC MITIGATION
   Disasters have significant economic
    setbacks at ind./comm./society levels
   The poor & disadvantaged suffer most
   Insurance     significantly  empowers
    people & economy
   Shifts burden from aid / state
    intervention
    INDIA – COUNTRY PICTURE
   Notedly vulnerable
    Risk include -    drought, floods
                   -  cyclones / storms
                   -  earthquakes
                   -  tsunami, etc
   Vulnerability maps indicate areas of
    multiple risks
RECENT MAJOR DISASTERS
Maharastra (Latur) earthquake   -   1993
Gujarat cyclone                 -   1998
Orissa (super) cyclone          -   1999
Gujarat earthquake              -   2001
Tsunami                         -   2004
Mumbai/Gujarat/Bangalore/       -   2005
Chennai floods
Kashmir Earthquake              -   2005
           NATURAL DISASTERS IN
              INDIA 1990-2005
                      # of Events   Affected                Damages $US (000's)

Drought                   21              1,391,841,000                1,898,721

Earthquake                24                   24,966,300               524,900

Epidemic                  62                     264,277                      0


                          38
Extreme Temperature                                    0                144,000

Flood                    167               676,372,850                10,365,781

Slides                    38                     222,300                  4,500

Wave/Surge                2                      647,599               1,500,000

Wild Fires                2                            0                  2,000

Wind Storm               136                   82,279,340              8,773,500
 HAZARD MAP
Wind & Cyclone
EARTHQUAKE
FLOOD
DISASTER MANAGEMENT
 a multi-disciplinary approach
 valuable studies by GOI, WB,

  other bodies incl. reinsurers
 preparedness plans

 recovery plans
      RISK & INSURANCE
   To move disaster management from passive to
    active
   Work on to identify/reduce/transfer risks
   Resulting risk reduction a tool for sustainable
    development
   Insurance can incentivise risk reduction
    approaches
   It can monitor the quality/extent of mitigation
    measures
   Pushes the burden of loss from state/
    community to insurer
    HAZARD IDENTIFICATION
   Hazards spread across areas (use of
    historical data)
   Exposure        assessment      based      on
    concentration (people/assets)
   Vulnerability       (intensity)    estimation
    calculation of damage ratio
   Estimation of probable maximum loss (PML)
   Readiness for the unexpected
       RISK ASSESSMENT
   Keeping track of socio-economic
    changes
   Understanding climatic changes
   Identifying urban/other
    concentrations
   Evaluating existing risk paradigms
   Predicting future scenarios
RISK ASSESSMENT Contd.

 Risk mapping
 Use of experience data

 Inspections / reports

 Research & studies
RISK ANALYSIS – THE RISK
         CHAIN

      Hazard / Risk
         Factors




     Consequence
      RISK CONTROL /
        PREVENTION

 Risk avoidance
 Risk Reduction

 Risk neutralisation

 Loss prevention

 Loss reduction
    MANDATED RISK CONTROL
   Land use planning & building code
    enforcement
   Strengthening of building codes
   Compliance with environmental
    laws
   Fire prevention rules compliance
    USE OF POLICY TERMS &
            RATES

 Underwriting & risk scan
 Inspection & recommendations

 Use of warranties & conditions

 Rate variations

 Deductibles
    INSURANCE FACILITATION
          MEASURES
   Introduction of new policies
        Weather insurance
        Agricultural insurance
        Micro-insurance policies
   Compulsion to include cat covers
    (exclude as option to policy purchaser)
        riot, strike, malicious act, storm, tempest,
        flood)
   Option to add
        earthquake
        terrorism
PENETRATION INITIATIVES
   Micro insurance regulations
   Bancassurance / covers riding on credit
    products
   New intermediaries –
       Brokers
       Corporate Agents
   Government channels
   Corporate channels – E- Chopal
BUILDING CAPACITY
 Insurers
 Reinsurers

 Terrorism Pool

 Natcat Pool
        RESPONSE AFTER
         CATASTROPHES
   Rapid response measures
    - get loss assessors to the spot
    - communicating in media
    - confirming proof of loss
      generic/specific
    - interim payments
    - time frame for settlements
COORDINATED APPROACHES

 Liaison with authorities
 Cooperation / coordination

  among insurers
 Adopting standard practices

 Empowerment of officials

 Board/Regulator/ Govt. oversight
THANK YOU

				
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