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INDIA. 1. Is your country is prone to natural disasters such as earthquakes, floods, and storms?. 1. River floods Droughts Earthquakes Cyclone formations Landslides and avalanches. 2 .
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1 Is your country is prone to natural disasters such as earthquakes, floods, and storms?
1 • River floods • Droughts • Earthquakes • Cyclone formations • Landslides and avalanches
2 What percentage of expected annual economic losses (all losses to the economy) due to natural disasters is insured?
2 • No precise data • Out of 100 Most Expensive Natural Disasters of the 20th century, India accounts for five • India is the second most disaster prone country in the world
3 • What are the risk transfer (reinsurance)/risk retention patterns for catastrophe type risks in the local insurance industry?
3 • Insurance companies have not generated and exposed significant capital for underwriting catastrophe perils.I • insurers, with longer and broader expertise, remain willing to shoulder the major risk via reinsurance. • Companies limit their catastrophe risk retention levels by sharing with the reinsurers in the form of a surplus arrangement and the balance being retained to the net account.
3 • Over recent years, tight markets have had a pass-through effect including proportionately higher commissions. • Policy coverage restrictions are generally designed and imposed by foreign reinsurers, and their effect falls on the policyholders rather than the insurance companies • Insurance companies benefit by the reduced risk exposure from the coverage restrictions,
3 • Reliance on traditional methods of risk retention and risk transfer • percentage of net-worth • excess of loss cover for catastrophe protections. • Two-risk warranty is invoked in all catastrophe protections. • Exploration of Alternative Risk Transfer (ART)
3 • Series of losses can erode an insurer's net account and financial stability. • Catastrophe Reserve
3 • Insurance industry's role for active involvement in promoting hazard and vulnerability mitigation has been mixed. • Complexities and costs of implementation • Reinsurers are seen as unlikely to share such costs • Leadership role on mitigation measures a government function.
4 Are the current retentions of catastrophe risk by local insurance companies adequate?
4 • Retentions by the local insurance companies have been adequately protected. • Cat XL covers together with the whole account XL covers have protected the balance sheets of insurance companies • ”Umbrella cover"
4 • Potential impact of catastrophe losses in closest collaboration with their reinsurers, and generally the latter's views prevail. • PML, or expected aggregate catastrophe risk exposure help reinsurers determine the premium • Reinsurers' premium levels have a very high gearing effect on the premium level charged under the primary policy issued to the policyholder.
5 • Are the current rates for natural disasters risk coverage actuarially sound in your country?
5 • Reinsurance product designed and priced by foreign reinsurers on the basis of their worldwide (rather than Indian-area) catastrophe experience. • Need to evaluate portfolio risks precisely to demonstrate true exposures to reinsurers, and maintain reinsurance protection at a justified and reasonable cost.
5 • Lack of credible data. • Data in respect of risk accumulation is not available. • Instead of applying actuarial principles the insurers applying their own judgement • Foreign reinsurers charging rates, which are not commensurate with the risks involved. • Competition primarily seeking reinsurance commission revenues rather than underwriting or "risk taking".
6 • Please list all possible alternative (to the one that exists in your country) approaches to the management of natural disasters risk and indicate major pros and cons of each approach?
6 • Central Government plays a major role as far as mobilisation of financial resources • Calamity Relief Fund (CRF) • National Fund for Calamity Relief (NFCR) • Hazard Maps • Vulnerability and Risk Assessment
6 • Insurance Industry • Reinsurance Pools & Financial Management Options
Thank You Arup Chatterjee -Team Leader Suresh Mathur Rakesh Bajaj Randip Singh Jagpal Kamal Chaudhry B. Raghavan Suresh Nair R.C. Sharma
