Category Archives: International

A Decade of Natural Catastrophe Losses in China

In a recent study on China’s natural catastrophe (NatCat) perils, Gen Re collected direct economic loss data over the past 10 years (2007 to 2016).  I.I.I. staffer Brent Carris sums up the study below.

During the 10-year period covered by the study, 24 percent of catastrophe related economic losses came from earthquakes, only topped by droughts, at 25 percent. The remaining damages consisted of: rainstorms, typhoons, snow and low temperature, and hail and tornados at 24 percent, 12 percent, 8 percent and 7 percent, respectively.  In 2008, there was a significant spike in losses due to the Sichuan Earthquake.

According to AIR Worldwide, catastrophe insurance indemnity account for only 9 percent of direct economic loss in Asia. In China, a projection of this number would be even lower if based on the past 10 years’ major NatCat events. For example, insurance payout against total direct economic loss for the Sichuan earthquake in 2008 was 0.2%, and less than 1% for the Ya’an earthquake in 2013. Insurers are reluctant to provide coverage for high risk areas, notably due to insufficient pricing and the inability to monitor NatCat accumulation/aggregates.

The situation is expected to improve, however, as the development of catastrophe insurance is deemed an important aspect of the growth of China’s insurance industry.

The Week in a Minute, 9/28/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights. 

  • One week after Hurricane Maria struck Puerto Rico, the U.S. territory’s residents are dealing with extensive power outages and a breakdown of the supply chain which brings food and other essentials to the island.
  • The U.S. signed an agreement with the European Union (EU) governing how U.S. insurers and reinsurers are regulated in EU nations.
  • California’s Canyon Fire (Orange/Riverside Counties) and Grass Fire (Alameda County) have generated mandatory evacuations and widespread news coverage.

Swiss Re: Natural catastrophes: tornadoes, earthquakes, wildfires & floods – the story of 2016

On-demand Webinar

Last year, economic losses from Natural Catastrophes nearly doubled to USD 175 billion. Insured losses also jumped from to USD 54 billion from USD 38 billion. These numbers were at their highest since 2012 and mark a reversal from the recent below-average years.

In this webinar, experts from Swiss Re and the Insurance Information Institute review 2016’s global natural catastrophe and man-made disaster losses and explain what they could mean to the insurance industry on Thursday, April 27 from 11 – 12 PM EDT.

Watch this webinar now.

Presentation Date
Thursday, April 27, 2017

Speakers
Dr. Steven N. Weisbart, CLU
Senior Vice President and Chief Economist, Insurance Information Institute

Dr. Thomas Holzheu
US Chief Economist, Swiss Re

Dr. Josh Woodbury
Specialist Flood, Swiss Re

UK terrorism reinsurance pool will respond to any claims arising from Manchester attack

UK terrorism reinsurance mutual Pool Re stands ready to respond to any claims arising from last night’s horrific attack at a major concert venue in the city of Manchester.

At least 22 people were killed and more than 50 injured in the bombing as they left the Manchester Arena at the end of an Ariana Grande concert.

“Pool Re will work with its Members in resolving any claim arising from the attack as quickly as possible. We will make a further statement as more information becomes available.”

Most insurers providing commercial property and business interruption insurance in the UK (including many overseas companies and Lloyd’s syndicates) participate in Pool Re.

The government formed the mutual reinsurance pool for terrorist coverage in 1993, following acts of terrorism by the Irish Republican Army.

Last night’s attack comes 21 years after a bombing in Manchester’s main shopping district injured more than 200 people and caused an insured property loss of $966 million (in 2015 dollars). The 1996 Manchester bombing still ranks as the third costliest terrorist attack by insured property damage, according to the I.I.I.

Pool Re is one among a number of public/private risk-sharing schemes around the world that provide terrorism coverage, as discussed in a recent report by Marsh:

Here’s how the Pool Re scheme works:

  • Member insurers pay premiums at rates set by the pool. There are two geographic zones, one for major cities, with an adjustment for a “target risk,” and the other for the remainder of the country.
  • The primary insurer pays the entire claim for terrorist damage but is reimbursed by the pool for losses in excess of a certain amount per event and per year, based on its share of the total market.
  • The maximum industry retention increases annually per event and per year.
  • The government acts as the reinsurer of last resort, guaranteeing payments above the industry retention.
  • Only terrorism losses arising from damage to commercial property are covered by the pool. Coverage does not extend to life or personal injury.

I.I.I. Market Report: Managing Geopolitical Risk

On-demand Webinar
With the rising tide of nationalism and regional tensions around the world arguably more severe than since the Cold War, geopolitical risks seem to be only increasing. For insurers and insureds, the impacts of geopolitical risks can have a significant impact on the bottom line; whether through business disruption, financial loss, or even – and most tragically – human peril. Insurance is at the center of how businesses and people prepare and mitigate the risk.

In this webinar, leading experts from the insurance industry and the world of public affairs discuss the current geopolitical climate, subsequent risks for organizations and risk transfer solutions.

Watch this webinar now.

Presentation date
Tuesday, May 16, 2017

Speakers
Natalie de Clermont
Underwriter, Political Risk and Trade Credit, Neon

Harriet Karwatowska
Broker, Miller

Amy Pope
Nonresident Senior Fellow, Adrienne Arsht Center for Resilience

Hank Watkins
President, North America, Lloyd’s

Sean Kevelighan (moderator)
Chief Executive Officer, Insurance Information Institute

Additional Resources
Lloyd’s Report: Political Violence
I.I.I. White Paper: Terrorism Risk Insurance Program: Renewed and Restructured

From China With Love Insurance

Can’t buy me love, or can you? In China, at least, it appears you can.

This Valentine’s Day Chinese insurers have their hearts set on wooing customers with the sale of love insurance.

As Sixth Tone reports, love insurance comes in various packages. One policy offered by Answern Property & Casualty Insurance entitles customers to a congratulatory payment if they and their designated significant other get married any time between three and 13 years after taking out the policy.

Customers choose a one-time premium payment for the policy of 99 yuan ($14), 297 yuan ($43), or 495 yuan ($72) in return for a respective payout of 1,999 yuan ($291), 5,997 yuan ($873), or 9,995 yuan ($1,445), providing a valid marriage certificate is shown to the insurer in the allotted timeframe.

Other insurers will throw in a little extra love. For example, China Life will send 10,000 roses to the wedding ceremony of any customer who marries their partner three years after signing up for the 299 yuan plan, Sixth Tone explains.

Love insurance has been around for a few years now. See this 2012 report by the Financial Times.

More on how to make sure your loved ones and valuables are protected on the Insurance Information Institute’s Valentine’s Pinterest board.

Women Good for Insurance

We spend a lot of time explaining why insurance is good for individuals, society and the economy as a whole, but a new report reverses that equation.

It focuses on the current and anticipated impact of women on the global insurance market.

Conducted by the International Financial Corporation (IFC), AXA and Accenture, the report estimates that women’s individual spending on insurance premiums will grow to between $1.45 trillion and $1.7 trillion by 2030–half of it in just 10 emerging economies.

That represents a doubling from the current annual premium value of the women’s global market of $770 billion.

The report cites an increased level of education, income, improved socioeconomic status, and a greater need for protection as key reasons that make women a big opportunity for insurers.

This is strongly reflected in a very simple yet telling number: women across the world are willing to invest 90 percent of their income into their households.”

Furthermore, women entrepreneurs now represent one-third of the world’s business owners, and they need protection for their businesses. Just 31 percent of women entrepreneurs surveyed held protection or savings-oriented life insurance, for example.

WomensInsuranceMarketProjections2030

The report also highlights that women’s attitudes to fraud, claims and loyalty, their roles as a trusted source of recommendations, and their relational rather than transactional approach to networks make them a valuable customer and inexpensive brand ambassador for insurers.

Women can act as strong advocates or social marketers for insurers and financial services firms, and are more likely than men to recommend a product or service to their friends and family, the report finds. They are also greatly influenced by the advice of their female peers.

Therefore, women can play a key role in explaining and selling insurance products across customer segments, and especially to other women.

What women want and need from insurance varies by age, income level and lifecycle events, however.

The report urges insurers to abandon the one-size-fits-all approach and instead identify and target segments of women who share common needs and constraints in order to take advantage of this growth opportunity.

Check out I.I.I. facts and statistics on careers and employment to discover what percentage of the insurance industry workforce comprises women.

Eye On China

The Chinese insurance market is changing as quickly as any in the world, writes Insurance Information Institute (I.I.I.) chief actuary James Lynch.

China is the fourth largest insurance market, behind the United States, Japan and the United Kingdom, but it is poised to grow quickly as the government looks to insurance to “play a larger role in the country’s patchy social welfare system,” the Financial Times reports (subscription required).

The market may be best known for buying trophy properties worldwide. In the past two years, Anbang bought New York’s Waldorf Astoria, China Life bought a majority share of London’s Canary Wharf, and Ping An bought the home of insurance, the Lloyd’s Building of London.

Beyond the property plays, Fosun Group in May agreed to buy the 80 percent of property/casualty insurer Ironshore that it doesn’t own and  Fosun’s acquisition of U.S. p/c insurer Meadowbrook Insurance Group just received state regulatory approvals in Michigan and California.

The Financial Times report focuses on changes in the life sector, as the Chinese government encourages citizens to buy traditional life products and 401(k)-like pensions, but the P/C market is changing as well, as I recently wrote for the Casualty Actuarial Society (CAS):

China’s market has grown between 13 and 35 percent a year for the past decade . . . Property/casualty insurers wrote RMB 754 billion ($120 billion in U.S. dollars) of premium in 2014, 16.4 percent more than a year earlier. By contrast, U.S. property/casualty insurers wrote about $500 billion and grew just over 4 percent, with both figures reflecting the maturity of the U.S. market.”

Starting June 1, six provinces — about one-fifth of the country – overhauled the way auto insurance is priced, moving a bit closer to the U.S. model of loading expected claim costs for expenses and adjusting rates for underwriting factors like a good driving record.

China is also strengthening of capital standards, working on the same January 1, 2016, deadline as Europe’s Solvency II. It hopes its standard, known as C-ROSS, will become a template for emerging markets:

The new standard splits “supervisable” risks that regulators are good at addressing from the ones better handled by market mechanisms.

The supervisable risks are split between quantifiable ones, like insurance risk, and unquantifiable ones, like reputation risk. Another class of supervisable risks is control risk. For emerging economies like China’s, Huang said, it is even more important to watch how companies control their risks. Good risk management may result in a reduction in regulatory capital requirement, and poor risk management can result in a capital add-on of up to 40%.

There’s also a systemic risk element, which requires systemically important insurers to set aside more capital.”

The I.I.I. is drafting a white paper about global capital standards to be published later this year. I.I.I. President Robert Hartwig gave a presentation that covered global insurance issues (and quite a bit else) late last year.

Munich Re: Economic Recovery Drives Global Premium Growth

Global insurance markets are seeing stronger growth, thanks to the economic upswing in many industrialized countries, according to an annual study by Munich Re.

Munich Re’s Insurance Market Outlook 2014 finds that rate increases in a number of high volume markets are also having a positive effect on premium growth.

At the global level, Munich Re expects real overall growth in primary insurance premiums at 2.8 percent this year and 3.2 percent in 2015, influenced mainly by stronger growth again in life insurance.

[In 2013, global insurance markets saw restrained growth of 2.1 percent in real terms, with primary insurance premiums in the life insurance segment growing by just 1.8 percent, due to a number of regulatory one-off effects.]

While in recent years dynamic growth in emerging countries has served as the decisive growth driver of global premium volumes, especially in property/casualty insurance, Munich Re notes that it is the industrial countries whose contribution to growth is currently increasing.

Many emerging countries are currently experiencing a cooling of their economies, and this is expected to have a dampening effect on premium growth in 2014 and 2015.

In the long-term however, Munich Re expects that emerging countries will continue to become more important for the global insurance markets.

The emerging Asian countries will see the highest increases, with their share of global premium volume expected to rise by 5 percentage points, from 9 percent in 2013 to 14 percent in 2020.

The Chinese market, already the fourth-largest primary insurance market with premium volume of over ┚ ¬210 billion in 2013, will more than double by 2020 to become the third-largest market worldwide, according to Munich Re.