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Preparing for catastrophes and disasters 03 October 2013 Andi Vossberg.

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Presentation on theme: "Preparing for catastrophes and disasters 03 October 2013 Andi Vossberg."— Presentation transcript:

1 Preparing for catastrophes and disasters 03 October 2013 Andi Vossberg

2 1.Individuals 2.Insurance Industry 3.Government / Municipalities 4.Other parties 2 View of different stakeholders

3 1.Property damage 2.Injuries 3.Fatalities 4.Looting 3 Individuals View of different stakeholders

4 1.Large number of claims 2.Many major claims 3.Sound coordination of claims personal 4.Shortage of loss adjusters 5.Too many claims assigned to an insufficient number of adjusters 4 Insurance Industry View of different stakeholders

5 6.Late appointment of adjusters with international experience 7.Infrastructure 8.Little or no cooperation from the insureds in many cases 9.Generous advance payments without supporting documents 10.Clients damage vs. own damage 5 Insurance Industry View of different stakeholders

6 1.First aid 2.Denial of access 6 Government / Municipalities View of different stakeholders

7 1.Telecommunications 2.Public utilities 3.Hospitals 4.Aid organizations 5.Hotel facilities 7 Other parties View of different stakeholders

8 Day / night Weekend / working days Summer / winter Economical cycle > boom / recession Election years 8 Date of the event Timing of event influencing the loss amount

9 Ensure efficiency in claims management Avoid organizational shortfalls Avoid loss of reputation Reduce overall cost 9 Proactive planning

10 Proactive or preventive actions Measures during catastrophe and its immediate aftermath Loss mitigation, repair, restoration, subsequent procedures in the medium term 10 Designing countermeasures

11 1. Review corporate catastrophe plan Establish employee internal teams and duties Identify and prepare alternate place to conduct business Data base back ups Review employee personal contingency plans Repeated awareness & training of contingency plans 2. Secure portfolio information List of probable loss by CRESTA Zone, Geo coded information even better Aggregates by risk Insurers view: 11 First steps before the occurrence

12 3. Local and international adjuster teams selection Establish rates Secure agreements and service providers contracts Prepare uniformed forms and instructions as to the construction costs and unitary prices Secure list of approved experts Inspect high exposure risks Insurers view - continued: 12 First steps before the occurrence

13 Cooperation with loss adjuster and insurer to optimize reporting Smaller losses: Bordereaux showing loss amount on single risk basis Large single losses: Reinsurers are interested in detailed reports. Complex and facultative losses: General involvement of leading reinsurer to be initiated by the cedent s The reinsurer 13 First steps before the occurrence

14 No.Insurer ReinsurerAdjuster Volum. anal. expert Accounting expert Restoration company Insured 1 Identify Cat scenarios and areas of risks that may be affected X XX X 2 Elaborate own business continuity plan X X 3 Review general policy terms X 4 Issue policies and properly inform insureds on scope of cover and limits X 5 Inspect the risks and draw up loss prevention recommendations X X 6 Agree collaboration with adjusters, experts and restoration companies XXXXXX 7 Obtain individual contingency plans for adjusters, experts and restoration companies X XXXX 8 Obtain individual contingency plans from adjusters, experts and restoration companies X X X 9 Inform loss adjusters and accounting experts on scope of covers and limits XXX 10 Agree on method of reporting X XX X 11 Prepare check lists XX 12 Establish funds for dealing with losses immediately XX 13 Annual meeting: to update contingency plans with all parties involved (for hurricane scenarios, before the start of the hurricane season) X X X X = involved party; = Optional 14 Preparation phase – coordination of activities between parties involved

15 No.Insurer ReinsurerAdjuster Volum. anal. expert Accounting expert Restoration company Insured 1 Organize an emergency meeting to coordinate concrete activities when a hurricane is imminent or in the immediate aftermath of a cat event X XXXX 2 Quantification of staff needs XXXXX 3 Assign specific works and tasks XXXXX 4 Instruct/engage adjusters, experts and restoration companies X XXXX 5 Inform again loss adjusters and accounting experts on scope of covers and limits XXX 6 Coordinate travel to the disaster area XXX 7 Coordinate lodging and service offices XXXX 8 Purchase / hire of generating equipment and fuel, including operating and servicing personnel XXX 9 Coordinate mobilisation of restoration equipment and materials X 10 Mobilisation to the disaster area XXXX 11 Obtain accommodation / food / drink in the disaster area XXX 12 Mobilisation of equipment and material XX 13 Set up provisional / temporary offices, workshops for restoration work XXX 14 Hire sheds to carry out the restoration work and keep the salvaged goods XXX 15 Inspect the risks affected / agree on measures to minimise damage X XXXX 16 Start restoration work asap XXX 17 Estimate of total damage XXXX X = involved party; = Optional 15 Actions following the NatCat occurrence coordination of activities between parties involved

16 No.Insurer ReinsurerAdjuster Volum. anal. expert Accounting expert Restoration company Insured 1 Carry out survey, evaluation and documentation of individual losses together with the Insureds representatives X XXXX 2 Clearly separate direct damage from improvements or normal maintenance works XXXX 3 Draw up correct basis for unit prices and labour XXX 4 Estimate real cost of indemnifiable repairs and fix property damage reserves XXX 5 Coordinate repair and replacement work XX 6 Obtain financial data on the operation affected XXX 7 Estimate repair times and establish LOP reserves XXX 8 Recommend advanced payments where appropriate X 9 Advanced payments where appropriate XX 10 Verify appropriate execution of repair / replacement work affected XXXX 11 Obtain and verify invoices for repair / replacement XX 12 Quantification and sale of salvage XX 13 Final report on property damage X 14 Obtain accounting data on all of the property affected XXX 15 Verify that operations are resumed after completion of repairs 16 Final indemnity payment X 17 Final indemnity payment XX 18 Draw up recommendations to avoid similar / identical losses in the future or at least minimize them as far as possible XXX X = involved party; = Optional 16 Loss Adjusting – coordination of activities between parties involved

17 Chile in the immediate aftermath of the event

18 Weakness of the infrastructure in the affected area aggravated the situation Utilities (electricity, water, telephones/communication network incl. cell phones) interrupted for several days Damaged roads, fallen bridges, i.e. difficult access Hotel capacities largely reduced Curfew limited the mobility during the initial weeks Employees of industrial companies did not go to work for several days in order to stay with their families Lack of manpower and of construction material retarded the beginning of loss minimisation measures and of repair works 18 Chile – The immediate aftermath of the event

19 Chilean law requests: Loss adjustment only through locally authorised loss adjusting companies Full settlement of claims affecting private lines within 3 months of the loss notification 19 Chile – The immediate aftermath of the event

20 Challenges: Mass losses at private buildings/apartments (mortgage insurance) Multiple loss notifications from the insured, the broker or the bank One building/several owners/different insurance policies Difficulties to decide on demolition vs. repair Large industrial risks: Lack of clarity of certain insurance policies, i.e. on sums insured for business interruption Uncertainties regarding preliminary loss estimates, in particular with business interruption claims Public adjusters who work for the insured and raise expectation of higher indemnifications 20 Chile – The immediate aftermath of the event

21 Role of loss adjusters Number of loss notifications superseded by far the initially available capacity of local loss adjusters Large complex losses required help of affiliated international organisations, including forensic accountant experts in BI 4 – 6 weeks needed to drastically increase office space, manpower and equipment. Beginning of efficient work only then Large number of claims made it unable to comply with 3 months settlement request. This timeframe had to be extended By the end of 2010 vast majority of householders claims were settled 21

22 Total31 Aug Feb Paid indemnification:USD bnUSD bn Commercial / Industrial31 Aug Feb Number of claims notifications:31,86631,811 Liquidated claims:16,97028,294 Closed claims (paid or to be paid) :8,79315,666 Not indemnifiable (e.g. below deductibles): 7,29812,152 Paid indemnification:USD bn Homeowners31 Aug Feb Number of claims notifications:190,199189,491 Liquidated claims:156,242188,478 Closed claims (paid or to be paid) :105,694125,904 Not indemnifiable (e.g. below deductibles): 46,33662,574 Paid indemnification:USD bn 22 Statistics

23 Stipulations in Chile Deductibles are regulated for residential and commercial risks as follows: Residential risks: 1% of sum insured, min. UF 25 (approx. USD 1.000) Commercial risks: 2% of sum insured, min. UF 50 (approx. USD 2.000) Consequences Homeowners complaint against deductibles Political Issue. Superindendence asked insurance industry to withdraw deductibles Insurance industry did not accept withdrawal and explained why deductibles are an absolute need in Nat Cat 23 Mass claims – impact of deductibles

24 Number of Claims vs. Deductible [UF] Mass Claims – Residential Risks Portfolio (example) Number of Claims Deductible [UF] Number of claims UF 1 = approx. USD 40 24

25 Indemnity 100% [USD] vs Deductible [UF] 25 UF 1 = approx. USD 40 Claims below deductible (ca. USD 28 m) Mass Claims – Residential Risks Portfolio (example) Amount of Indemnity

26 THANK YOU VERY MUCH FOR YOUR ATTENTION. Andi Vossberg © 2011 Münchener Rückversicherungs-Gesellschaft © 2011 Munich Reinsurance Company


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