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ROLE OF INSURANCE IN CATASTROPHE RISKS - INDIA

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

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ROLE OF INSURANCE IN CATASTROPHE RISKS - INDIA

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  1. ROLE OF INSURANCE IN CATASTROPHE RISKS - INDIA • Hazard Identification • Risk Assessment • Risk Prevention • Mitigation PC James Executive Director IRDA

  2. 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

  3. CURRENT INITIATIVES OF IRDA • Micro – Insurance • Health Insurance • Intermediary Development • Detariffing • Catastrophe Risks

  4. KEY ASPECTS OF FINANCIAL VULNERABILITY • Catastrophe Risk Exposures • Insurance penetration • Size of the country • Diversification/concentration of economic activities (geographically)

  5. 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

  6. INDIA – COUNTRY PICTURE • Notedly vulnerable Risk include - drought, floods - cyclones / storms - earthquakes - tsunami, etc • Vulnerability maps indicate areas of multiple risks

  7. 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

  8. NATURAL DISASTERS IN INDIA 1990-2005

  9. HAZARD MAP Wind & Cyclone

  10. EARTHQUAKE

  11. FLOOD

  12. DISASTER MANAGEMENT • a multi-disciplinary approach • valuable studies by GOI, WB, other bodies incl. reinsurers • preparedness plans • recovery plans

  13. 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

  14. 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

  15. RISK ASSESSMENT • Keeping track of socio-economic changes • Understanding climatic changes • Identifying urban/other concentrations • Evaluating existing risk paradigms • Predicting future scenarios

  16. RISK ASSESSMENT Contd. • Risk mapping • Use of experience data • Inspections / reports • Research & studies

  17. RISK ANALYSIS – THE RISK CHAIN Exposure Units Hazard / Risk Factors Environment Perils Outcome Consequence

  18. RISK CONTROL / PREVENTION • Risk avoidance • Risk Reduction • Risk neutralisation • Loss prevention • Loss reduction

  19. MANDATED RISK CONTROL • Land use planning & building code enforcement • Strengthening of building codes • Compliance with environmental laws • Fire prevention rules compliance

  20. USE OF POLICY TERMS & RATES • Underwriting & risk scan • Inspection & recommendations • Use of warranties & conditions • Rate variations • Deductibles

  21. 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

  22. PENETRATION INITIATIVES • Micro insurance regulations • Bancassurance / covers riding on credit products • New intermediaries – Brokers Corporate Agents • Government channels • Corporate channels – E- Chopal

  23. BUILDING CAPACITY • Insurers • Reinsurers • Terrorism Pool • Natcat Pool

  24. 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

  25. COORDINATED APPROACHES • Liaison with authorities • Cooperation / coordination among insurers • Adopting standard practices • Empowerment of officials • Board/Regulator/ Govt. oversight

  26. THANK YOU

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