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Insurability of Natural Catastrophic Risks Underwriting Considerations

Insurability of Natural Catastrophic Risks Underwriting Considerations. Graeme Owens Global Property Executive, Eastern Zone, EMEA AIG Property Casualty 6 th International Istanbul Insurance Conference 25 th September 2014. Insurability of Natural Catastrophic Risks. Introduction

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Insurability of Natural Catastrophic Risks Underwriting Considerations

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  1. Insurability of Natural Catastrophic Risks Underwriting Considerations Graeme Owens Global Property Executive, Eastern Zone, EMEA AIG Property Casualty 6thInternational Istanbul Insurance Conference 25th September 2014

  2. Insurability of Natural Catastrophic Risks • Introduction • Economic Cost / Insured Cost of Natural Catastrophe • Underwriting Considerations 2

  3. 3

  4. Superstorm Sandy – Storm Dynamics Courtesy: CoreLogic

  5. Damaged Infrastructure Courtesy: Twitter and ABC News

  6. Water Street! Courtesy:

  7. 2011 NATURAL CATASTROPHE EVENTS Courtesy Source: MR NatCatSERVICE2011 :

  8. US Convective Loss Events Overall and insured losses 1980 – 2012 and First Half 2013 (Bill. US$) The insured and total economic cost of convective events has rising tremendously over the past 30+ years Convective events are those caused by straight-line winds, tornadoes, hail, heavy precipitation, flash floods and lightning Insured losses (in 2013 values) Overall losses (in 2013 values) Analysis contains: straight-line winds, tornadoes, hail, heavy precipitation, flash floods, lightning. 8 Source: Geo Risks Research, NatCatSERVICE.

  9. Underwriting Considerations

  10. Randomness versus Certainty • Increased Certainty • Climate Change • Teleconnection

  11. Climate Change - US Convective Activity • For the first time research shows that climatic changes have already influenced US thunderstorm losses

  12. Teleconnection - LaNina Effect Source: Twitter and ABC News

  13. Quantifiable • Business Globalisation • Complexity of Supply Chains • Increasing Demand for Contingent Cover • Just in Time Production

  14. Recent Illustrative Events of CBI Impact Tohoku Earthquake – 2011

  15. Impacts of Globalisation on Supply Chain Risk Insured

  16. Shared responsibility • Planning and Social Pressure • Government vs Insurance accountability – Flood Re UK

  17. UK Floods 2012 Source: BBCNews Source: bbc

  18. Economic and Mutuality Viability • Risk Pooling • TCIP - Turkey

  19. Words of Wisdom……..

  20. Modelled, Un–modelled, and Under-modelled Perils in 2011 Typhoon Roke US Winter Storm CAT 35 US Winter Freeze CAT 36 Kitami Hail Storm Japan Earthquake Hurricane Irene CAT 59 Typhoon Talas US Winter Storm (Oct 30) Tropical Storm Lee CAT 61 Thailand Floods US Spring Storms CAT 42&43 Australia Brisbane Floods incl Cyclone Yasi Brazil Landslide Brazil Floods (Jan) NZ Christchurch EQ CAT 04 ModelledPerils Non – Modelled/Under ModelledPerils 20

  21. Natural Catastrophe Words of Wisdom • “There are known knowns. These are things that we know” • Modelled Exposures • UK Flood • US Wind and Earthquake • European Wind • “There are known unknowns. That is to say there are things we know we don’t know” • Undermodelled and Un- Modelled Exposures • Japan Tsunami following earthquake • New Zealand liquefaction following Earthquake • US and Thailand Flood • Fire following any event

  22. Natural Catastrophe Words of Wisdom • “ But there are unknown unknowns. These are things that we don’t know we don’t know” • Contingent Business Interruption

  23. Bring on tomorrow Bring on tomorrow

  24. Whilst every effort has been taken to ensure the accuracy of the information in these pages, we make no representation and/or warranty express or implied that the financial information and/or information is correct, complete or up to date.  The financial information and/or information is subject to change at any time without notice.  You should not take (or refrain from taking) any action in reliance on the financial information and or information and we will not be liable for any loss or damage of any kind (including, without limitation, damage for loss of business or loss of profits) arising directly or indirectly as a result of such action or any decision taken. AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. AIG Europe Limited is authorised and regulated by the Financial Services Authority. Registered in England: Company Number 1486260. Registered Address: The AIG Building, 58 Fenchurch Street, London EC3M 4AB. AI452168

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