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Middle East Insurance Forum 2006

Middle East Insurance Forum 2006. The Impact of Natural Disasters on Regional Trends in Insurance. Paul Jewell Regional VP, Property & Energy Middle East, Mediterranean & South Asia 21 st March 2006. Topics. Global Warning Hurricanes Typhoons Earthquake/Tsunamis

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Middle East Insurance Forum 2006

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  1. Middle East Insurance Forum 2006 The Impact of Natural Disasters on Regional Trends in Insurance Paul Jewell Regional VP, Property & Energy Middle East, Mediterranean & South Asia 21st March 2006

  2. Topics • Global Warning • Hurricanes • Typhoons • Earthquake/Tsunamis • Impact on Insurance and Reinsurance • How does all this relate to the Middle East?

  3. Global Warming • Mean annual surface air temperature risen by 0.5ºC (0.9ºF) since 1960. • Rise in Intensity of Events • World-wide impact : US Gulf Coast, Japan, Australia, Europe, Pakistan, India, Sri Lanka and Thailand ..etc • Predictions of increasing water levels due to the melting of the polar ice caps

  4. Hurricanes • Long term average 9.6 per season with 2 or 3 becoming intense hurricanes. • 20 to 30 year cycles • Latest started in 1995. Another 10+ years of instability • Increased flooding , mudslides and storm surges

  5. Hurricanes • Hurricane Katrina – 3rd strongest storm to make landfall in the US • Estimated Insurance costs $40bn to $55bn • Economic loss from US windstorms in 2005 estimated at $174bn • 7.5% of US non-life premium volume • Add the impact of 2004, estimated insured losses range from $20bn to $40bn (Charley, Frances, Ivan and Jeanne)

  6. Typhoons • Japan affected by approx 2.6 Typhoons a year over past 30 years • 2004 was considered a 1 in 140 year event • Hong Kong has been hit by a strong Typhoon on average every 5.7 years. Is 2006 the next?

  7. Earthquakes • Annual Average is 134 per annum (6.0 to 6.9 on the Richter scale) • Major earthquakes (7.0 to 7.9) 17 per annum • 1 per annum exceeding 8.0 • Generally 7.5 magnitude is required to generate a Tsunami • Average is 6 Tsunamis per 100 years in the Pacific Ocean. • Atlantic Ocean considered a 1 in 10,000 year event

  8. Earthquakes • In the last decade destructive Tsunamis seen in Nicaragua(1992), Indonesia (1992,1994,1996), Japan (1993), Philipines (1994), Mexico (1995) Peru (1996, 2001), Papua-New Guinea (1998),Turkey (1999) and the most recent in Indonesia (2004) • In 2005 earthquakes were seen close to the region. Pakistan, Iran, Turkey, Greece and Indonesia • Some tremors felt in Dubai! • No or little warning prior to an event • Larger potential for devastation of property and human life

  9. Impact on Insurance & Reinsurance • 2005 total economic losses estimated at $230bn from catastrophes alone • United Nations project that weather related losses will impact the industry to the tune of $150bn over the next decade • Weather patterns are changing with extreme events seen across the globe • A number of insurers ‘blew’ through their catastrophe protections (India and Sri Lanka particularly) • Increased insurance penetration in developing countries could raise the potential insured losses

  10. Impact on Insurance & Reinsurance • Global Insurers and Reinsurers have been impacted • Fresh capital has been required to sustain some operations • PXRE is the highest profile casualty • Retrocession market has become limited • Price increases seen in US markets • Oil and Petrochemical industry in the US Gulf seeing 4 fold increase in premiums • Insurers reviewing their catastrophe modeling

  11. Impact on Insurance & Reinsurance • Awareness has prompted increase catastrophe purchase • Reinsurers are requesting a premium for catastrophe prone areas. • Insurers taking higher retentions • Improvement in terms seen in the US and some regions • Cash flow underwriting and rate reductions noted in other markets (India, Sri Lanka and Pakistan) • Mergers and acquisitions are now being reported. Swiss Re takes over Gen Re is the highest profile.

  12. How does all of this relate to the Middle East? • What is around the corner? • Will increasing sea levels have an impact on the reclaimed land developed areas? • Is a Tsunami a threat? • Are there exposures that haven’t been modeled yet? • Snow in the UAE last year was a first? • Will new capital in Bermuda reach the Middle East?

  13. How does all of this relate to the Middle East? • Is there sufficient ROI for reinsurers in low risk areas? • Some Lloyds syndicates have increased their premium threshold. Focus on US and well rated business • Reinsurers focus is on the US but will turn to other areas. Expect pressure for rate movement at the end of 2006/7 • If 2006 is a bad catastrophe year their will be an impact on the industry as a whole. • Impact will be felt in 2007.

  14. Thank You Questions?

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