Europa Re Value Proposition
A brief outline
Riccardo Ciccozzi
Accreditation & Representation
Specialist
Baku, June 20, 2013
1
Agenda
Context
– SEE Exposure to Natural Disasters
– Natural Disasters’ impact in SEE
– Catastrophe Insurance Markets
Project
– Vision and Market Value preposition
– Key services
– Main Steps
Challenges ahead
2
Major Natural Disasters in South East Europe
Source:
Mitigating the Adverse Financial Effects of Natural Hazards on the Economies of South Eastern Europe
A Study of Disaster Risk Financing Options
South Eastern Europe Disaster Risk Mitigation and Adaptation Programme - Eugene N. Gurenko Wael Zakout
The World Bank, Sustainable Development Department Europe and Central Asia Region and UN/ISDR secretariat Europe February 2008
3
SEE High Exposure to Natural Disasters
South East Europe (SEE) is highly vulnerable to natural disasters.
–
In the past thirty years, economic losses in excess of $70 billion were reported.
–
A major earthquake in Turkey in 1999 caused more than 17,000 deaths and economic
damages estimated at 5% of GDP.
–
Floods in Central and South East Europe alone in 2002 and 2005 caused economic losses
of $15 billion and $2.5 billion, respectively, leaving over 25,000 people homeless.
–
In ten of the twenty-eight countries in the region, up to 4 million people are exposed to
severe natural catastrophic perils, while up to 32 million (or 7% of the region’s population)
can be affected by natural disasters.
Climate Change is expected to worsen the region’s exposure
–
Due to the growing volatility of climate, smaller but more frequent events are also
becoming a major reason for concern.
4
aster riskDisaster
reduction
and
disaster
risk
Risk Reduction & Disaster Risk Financing
ncing are complements
Disaster Risk Financing
& Insurance
Opportunity cost of disasters
Disaster Risk Financing
Disaster
Risk Financing
reduces
the opportunity
reduces the opportunity
cost of
disasters (cost of
cost of disasters (cost
securing
funds to sustain
of securing
funds to
a natural
disaster)
sustain
a
natural
disaster)
Disaster Risk Reduction
Expected disaster losses
Disaster Risk Reduction
Disaster
Risk Reduction
reduces
the expected
reduces the expected
disaster
losses
disaster losses
5
Catastrophe Insurance Markets – Development
Prospects
The growth potential of Cat Property Markets in SEE is therefore very high.
For example:
Turkey Market
–
–
Turkish Catastrophe Insurance Pool (TCIP) established in 1999
Turkey cat insurance penetration at 25% of insurable stock
Romania Market
–
–
Romania Natural Disaster Insurance Pool (PAID) established in 2008
Romania cat insurance penetration at 60% of insurable stock
Success can be achieved through combined efforts of the public and private
sectors:
–
–
–
–
–
Support by adequate government policy
Regulatory reform
Consumers’ education
Reliable claims performance
Commercial connection between flood / quake coverage and mortgage loans
This was achieved in Central Europe:
–
–
–
–
Poland – Cat Insurance Penetration at 55%
Slovakia - Cat Insurance Penetration at 58%
Czech Republic - Cat Insurance Penetration at over 60%
Hungary - Cat Insurance Penetration at over 70%
6
Catastrophe Property Risk Insurance
Pools – Examples
Regional (sovereign) catastrophe risk insurance pools
–
–
Caribbean Catastrophe Risk Insurance Facility
Pacific Disaster Risk Insurance Program (under development)
National property catastrophe risk insurance pools
–
–
–
–
–
–
–
Turkish Catastrophe Insurance Pool
California Earthquake Authority
Taiwan Residential Earthquake Insurance Pool
Algeria Catastrophe Risk Insurance Pool
Romanian Natural Disaster Insurance Pool (PAID)
Consorcio de Compensación de Seguros (Spain)
CCR (France)
A variety of tools
and approaches
are possible
Etc.
Issue Cat Bonds?
Mandatory Insurance?
Regional Spread or
National Focus?
7
Flood
Nat Cat Risk
Regional
Exposure
Heat Waves
Drought
Quake
 South East Europe (SEE) is highly vulnerable to natural disasters
 Climate Change is expected to worsen the region’s exposure


Nat Cat
Damage
Impact


Private
Insurance?


Adverse impacts on
governments’ budgets
Socio-economic
implications on
households
Adverse economic
effects on business
Very Low Cat
Insurance Penetration
Lack of Risk
Awareness
Market Growth
Potential
Europa Re
Solution
8
Europa Re - Business Model – Vision & Mission
A Swiss-based company
owned by countries of
Southeast Europe (SEE)
Supported by the World
Bank, EU, UNISDR, SECO
and GEF
Providing innovative
technology-driven
solutions to SEE insurers
writing catastrophe and
weather risk insurance
products
Vision - Increase the level of catastrophe insurance penetration amongst households, small and medium
enterprises (SMEs) and farmers in the SEE region
Europa Re
Project
Mission
•
•
•
•
Educating consumers
Improving and standardize credit quality of insurance products
Enabling insurers to sell weather and catastrophe risk insurance
Helping governments and insurance regulators
9
Key Services - Risk Management
Market Issue: lack of high-resolution and reliable catastrophe (cat) models for
SEE cat exposures
ERe Solution: provide local insurers with state-of-the-art probabilistic cat
modelling tools based on the latest technology offered by Market Leaders
Main Benefits: High-resolution Models available at a much lower cost
ERe’s Cat Models’ technology is underpinned by:
–
–
–
AIR’s global research in catastrophe risk modelling
Country specific risk data
Unique business applications
ERe’s Risk management systems allow insurers to accurately evaluate:
–
–
Potential losses resulting from catastrophe insured risks at any point in time;
Net retention capacity relative to available solvency.
10
Key Services CATMonitor
Real-time monitoring of disaster events and option to receive notifications
Reports on disaster risk assessment of their properties/businesses
Identification of major structural vulnerabilities of their properties
Advice on possible risk reduction techniques
Referrals to insurance companies accredited under Europa Re program
Community catastrophe risk assessment and management service 11
Key Services - What will Europa Re do for Consumers
Expertise on
improving the
subsidy scheme
Awareness
Education
Europa Re
New user friendly
and affordable
products
Improved market
mechanism
Development of
distribution
channels
New Parametric
Insurance
Products
Know how
Insurance
companies
As result:
• Insurance premium subsidies
Consumers
Government
• Direct subsidies
- Consumers’
profit and
assets are
better
protected
- Higher incentive
to produce
Outcome
- Increased
production
- Increased
income
• Basic Insurance protection
• Specialized Insurance
protection
- Higher
contribution to
economy
12
Key Services - What can be expected from ERe products
Simple
Earthquake and
Flood insurance
Innovative
for homeowners
and SME’s
Weather
insurance
products for
agriculture
Other as
Affordable explored to fit
market needs
Products
Covering
fastconsumers’
and simplified loss settlements
Easily
production
needs
accessible
Remote Sensing & Cat Modelling Technologies
Reliable
13
Europa Re Parametric products
1. Precipitation
excessive
drought
precipitation
(minimal rainfall)
2. Temperature
high heat
low heat
freeze
Main principle of parametric weather insurance:
Coverage in case of unusual behavior of weather
14
Example: Drought insurance
What triggers an
insurance event?
when total
amount of
precipitation for
the period is below
the minimum
threshold
What types of
thresholds?
1. minimum
threshold for
period
2. maximum
threshold for
period
(based on long
term average for
period)
What precipitation
values are accepted?
daily values of
precipitation
measured officially
by Authorized
National Weather
Service
15
A new perspective for claims
Event timeline
Pre-event
Event
Post-Event
Phase1
Geocoding at the
time of
underwriting
48-72 hrs
•Imagery data collection
•Remote Damage Assessment
•Phase1 Claims settled
Pre-event
Imagery
Phase 2
1-2 weeks
•Effectively target adjustors
and claims resources
•In-field damage assessment
•Phase 2 Claims settled
Exposure
data
Event Monitoring
& immediate
notification
Protocols
Before/After image
comparison
Phase 3
within weeks
•Claims submission
•Assignment
•Evaluation in-house or
send adjustors to review
•Phase 3 Claims settled
Claims
Adjusting and
Management
Financial
Management
Work Management
Documents I Correspondence I
I Contacts I
Litigation
Subrogation
Salvage
Main Sequencing Steps
Platform Testing
Compatibility and proper functioning of the systems
Europa Re Accreditation Sales Certificates
Europa Re Accreditation Claims Reporting
Certificates
Europa Re New Products Launch
Education and Promotion
17
Challenges ahead
Government Involvement:
–
New Legislation and
regulations shall be issued
in SEE to foster private cat
insurance
To educate, regulate and incentivize
Consumers’ resistance:
–
Lack of risk awareness / low trust in private insurance
Insurance Industry Resistance:
–
Promotional activities shall
target directly consumers in
the region
Local Insurers to enter into
formal cooperation with
ERe
What’s in it for me?
But,
Engage & Innovate
Lessons from the Macedonian farmers
18
Thank you for your attention!
Contact details:
info@europa-re.com
www.europa-re.com
19