Catastrophe Risk Modelling Benefits for Emerging African Markets Image: used under license from shutterstock.com Catastrophe Risk Modelling Benefits for Emerging African Markets 06th September 2016 Thabo Twalo – Munich Re of Africa

The Journey Which NatCat Risks? How to model them? The benefit for emerging African Markets Instead of calling it the agenda, we talk about the journey of NatCat issues during the next hour. Picture: wold map of natcat scenarios (Munich Re – via Nathan) OESAI conference Namibia 06 September 2016

NatCat Risks for Africa in general 1 NatCat Risks for Africa in general Image: used under license from shutterstock.com

Loss events in Africa 1980 – 2015 Geographical overview Earthquake, tsunami 21/28 May 2003 Algeria Overall losses: US$ 2.5bn Insured losses: US$ 0.01bn Fatalities: 2,200 Earthquake 12 Oct 1992 Egypt Overall losses: US$ 1.2bn Insured losses: minor Fatalities: 561 Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) Geophysical events (Earthquake, tsunami, volcanic activity) Selection of catastrophes Overall losses ≥ US$ 500m (in original values) Loss events Earthquake 10 Oct 1980 Algeria Overall losses: US$ 3bn Insured losses: minor Fatalities: 2,590 Drought Mar 2000 Morocco Overall losses: US$ 0.9bn Insured losses: minor Floods Jul–Dec 2012 Nigeria Overall losses: US$ 0.5bn Insured losses: minor Fatalities: 363 Drought Jun–Dec 2015 Ethiopia Overall losses: US$ 0.5bn Insured losses: minor Drought Jan–Dec 2015 Southern Africa Overall losses: US$ 1.7bn Insured losses: minor Floods Dec 2010–Feb 2011 Southern Africa Overall losses: US$ 0.55bn Insured losses: US$ 0.005bn Fatalities: 203 Floods Feb–Mar 2000 Southern Africa Overall losses: US$ 0.52bn Insured losses: US$ 0.05bn Fatalities: 1,000 Drought Nov 1990–Mar 1993 Southern Africa Overall losses: US$ 1.4bn Insured losses: minor Drought Jan 1982–Dec 1984 Southern Africa Overall losses: US$ 1.1bn Insured losses: minor Floods 25–29 Sep 1987 South Africa Overall losses: US$ 0.52bn Insured losses: US$ 0.25bn Fatalities: 487

Loss events in Africa 1980 – 2015 Number of relevant events by peril Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) Geophysical events (Earthquake, tsunami, volcanic activity) Accounted events have caused at least one fatality and/or produced normalized losses ≥ US$ 100k, 300k, 1m, or 3m (depending on the assigned World Bank income group of the affected country).

Weather-related loss events in Africa 1980 – 2015 Number of relevant events by peril Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) Accounted events have caused at least one fatality and/or produced normalized losses ≥ US$ 100k, 300k, 1m, or 3m (depending on the assigned World Bank income group of the affected country).

Significant loss events in Africa 1980 – 2015 10 costliest events ordered by overall losses OESAI conference Namibia 06 September 2016

Significant loss events in Africa 1980 – 2015 10 costliest events ordered by insured losses OESAI conference Namibia 06 September 2016

Significant loss events in Africa 1980 – 2015 10 deadliest events OESAI conference Namibia 06 September 2016

Flood in Africa Events 2000 - 2016 Flood Hazard Map Flood is most present peril in Africa Not only limit to a specific area in Africa Flood has different types – river flood, flash flood, storm surge … Influence of certain weather conditions (e.g. El Niño & La Niña) Key areas highlighted – close to rivers, lakes, coast OESAI conference Namibia 06 September 2016

Earthquake in Africa Events 2000 - 2016 Earthquake Hazard Map Most unpredictable peril in Africa as experience is quite low Peril for southern and eastern part of Africa Scientific models are quite good (lot’s of studies from university and common developments of model) Most dangerous is not only where the epicentre is but also in which direction the fault line is heading Example of Ethiopia, Addis Ababa OESAI conference Namibia 06 September 2016

Earthquake in Africa – Backup Example epi centre fault line Very important where epi centre AND fault line are Of course magnitude of Richter scale is important too! Africa not a EQ „hot-spot“ Example of Ethiopia, Addis Ababa OESAI conference Namibia 06 September 2016

Storm in Africa Events 2000 - 2016 Tropical Cyclone Hazard Map specific peril for south-east Africa especially the islands like Madagascar, Mauritius, Reunion climate has an impact on this peril difficult to model OESAI conference Namibia 06 September 2016

Hail is a risk too! Hail Hazard Map Example South Africa: Gauteng area is heavily affected Hail hardly predictable as certain weather constellations have to be given Influenced by storms Since of the hail has a massive impact Lot’s of experience which could be used for modelling Nevertheless development of a specific hail model remains a challenge OESAI conference Namibia 06 September 2016

How to model NatCat risks 2 How to model NatCat risks Image: used under license from shutterstock.com

Cat Modelling Develop own internal stochastic models Exposure Data Risk location Type of risk (commercial, industrial) Coverage (building, content …) Insurance conditions (deductibles, limits, …) Loss Data Internal data per line of business / location External data & analysis from broker / reinsurer … (loss data, exposure data, involved lines of business, accumulation values) (e.g. on basis of NatCat models from external vendors (event sets) and data from insurer ) Storm events Hail events Flood events Earthquake events Generation of event loss tables Derivation of return periods and respective PMLs from event loss table Determination and Parametrization of loss frequency distributions and loss severity distributions Simulation of Events * Storm * Hail * Flood * Earthquake OESAI conference Namibia 06 September 2016

Cat Modelling Use external vendor models Use broker models OESAI conference Namibia 06 September 2016

Benefits for the emerging African market 3 Benefits for the emerging African market Image: used under license from shutterstock.com

Benefits for emerging African markets 3 main components which will benefit: CLAIMS CLIENTS RISKS OESAI conference Namibia 06 September 2016

Benefits for emerging African markets worst case scenarios know your exposure / max loss CLAIMS transparency immediate actions possible faster claims handling OESAI conference Namibia 06 September 2016

Benefits for emerging African markets risk depending premiums (risk adequate) locations & insured values are linked buy necessary cover – individually adjusted CLIENTS emergency contacts possible risk awareness OESAI conference Namibia 06 September 2016

Benefits for emerging African markets loss mitigation measures risk management RISKS safety measures influences loss severity and loss frequency impact on economy OESAI conference Namibia 06 September 2016

Benefits for emerging African markets Biggest Challenge OESAI conference Namibia 06 September 2016

Thabo Twalo – Munich Re of Africa Image: used under license from shutterstock.com THANK YOU! Thabo Twalo – Munich Re of Africa