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
2005
No of
No of
Total
Insured losses
Catastrophe fatalities
losses
(USD bn)
s
(USD bn)
397
97,000
230
83
% Insured
losses
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
Year
Gujarat Cyclone
1999
900
200
22%
Gujarat
Earthquake
2001
2,000
150
8%
Mumbai
floods
2005
Source : Market
information
2,500
650
26%

Estimated Estimated
economic insurance
loss ($ mn) loss ($ mn)
%
Insured
losses
Catastrophe
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
event profile of nondisaster prone areas

Typical disaster
event profile of
disaster prone areas

Frequency
Low
Frequency
High
Disaster events do not have this risk profile
Severity Low
Segment : Property Risks
Severity High
Terrorism Risk
Insurance Pool
 Fire insurance
 Nuclear pool

Frequency
Low
Micro-asset
insurance (Indonesia)
 Cat Bonds (Japan)

Severity Low
Frequency
High
Indian Terrorism Pool

Target Segment


Perils Covered



Terrorism
Managed by GIC
Coverage


Insuring population
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


Perils Covered



Householders
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


Perils covered



Low income households
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
Risks
Frequency
Low
Central American
Government
securitization scheme

Health insurance
risks (RSBY /
Aarogyashree)
 Weather insurance

Severity Low
Frequency
High
Weather Insurance

Target Segment


Perils Covered


Rainfall Deficit
Managed By


Indian Farmers
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


Perils Covered


Reinsurance major
Coverage details



Earthquake
Managed By


Central American Government
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