Conference on Natural Catastrophes Challenges for Insurers and Reinsurers by Insurance Institute of India

Insurance Institute of India, Mumbai is organising one day conference on Natural Catastrophes in Mumbai on 20th march 2012.

 

SEMINAR THEME:
In recent years, we have seen Natural Catastrophes like the Gujarat Earthquake of 2001, the Tsunami of 2004, the Maharashtra Floods of 2005, the Kashmir Earthquake of 2005, the Kosi Floods in Bihar, Cyclone Nisha in Tamil Nadu of 2008 and Cyclone Thane of December 2011. Indian insurers did not have to suffer heavily due to these disasters for the simple reason – lack of insurance penetration!

The Government of India enacted the Disaster Management Act 2005 and formed bodies like „National Disaster Management Authority‟ (NDMA), State Disaster Management Authorities (SDMAs) and „National Institute of Disaster Management‟ (NIDM) to address issues relating to disaster management.

 

There was an attempt by the Indian Insurance Regulator in 2005 and later, to provoke a thought process in the insurance industry about the need for addressing concerns over natural calamities, which did not get implemented. The idea of creating a pool for containing natural catastrophes was recently revived by the Federation of Afro-Asian Insurers and Reinsurers (FAIR), which requested GIC of India to form a „Nat-Cat Pool‟.

III feels that Natural Catastrophe is a serious matter, worthy of serious debate. The enormity of the problem has to be appreciated from its economic angle. There should be systems to reach out to the vulnerable areas and population. The importance of insurance as a mechanism of funding the cost of catastrophe has to be appreciated by all stakeholders of the Indian insurance industry.

There are also issues like – If insurers do not bear the risk, who else will? What are the other ways by which the risk can be borne and shared? Again, if insurers can bear the risk, how will they manage it? That is, how much of the risk can be safely retained, how much reinsured and whether a pool can be one of the answers. It may be also worth pondering whether there can be a multi-pronged approach to the problem. Issues in risk evaluation and pricing are finer issues that would require detailed consideration.

We have a lot of models today as many have already tried out various solutions. There have been various regulatory measures. There are agencies who are experienced in risk modeling, proven methods whereby the capital markets can share the risk and insurers & reinsurers who have specialized experience in dealing with natural catastrophe risks.

III Seminar “Natural Catastrophes – Challenges for Insurers and Reinsurers”, attempts to initiate a thought process on the subject, at conceptual and practice levels. To ensure a few tangible takeaways from the Seminar, discussions will be mostly on the following lines:
Conceptual Clarity: Understand „Natural Catastrophes‟ as economic challenges and difficulties in estimating their magnitude in financial terms.
Why Catastrophes need a differential treatment? : In comparison to other insured perils, understand why insurers need to treat catastrophes and losses arising from catastrophes differently. Reason out why individual insurers cannot/ should not manage this risk themselves.

What are the viable options for Natural Catastrophe risk transfer? : Discuss popular risk transfer mechanisms for concept level clarity. Compare risk transfer mechanisms used by Natural Catastrophe insurers in different countries. Examine merits and demerits of risk transfer mechanisms especially Operation/ Implementation level issues of different mechanisms. Examine mechanisms that could be relevant in the Indian market, either on a solo basis or as a combo-plan.

How can insurers make schemes for Natural Catastrophe risk transfer work? : For instance, to consider setting up a Nat Cat Pool as an option, requirement of data has to be defined, minimum criteria for data quality has to be set, a mechanism for apportioning the premium that will contribute to the pool has to be agreed upon, pool manager has to be appointed and TORs defined, reporting systems have to be developed for reviewing the health of the pool, early warning signals have to be defined and possible strategies for remedial action should be thought of. The philosophy of periodically evaluating and apportioning pool liability as well as sharing liabilities (or profits) if the pool needs to be wound up have to be thought of in advance.

How can other stakeholders contribute to the success of Natural Catastrophe risk transfer schemes? : Definition of roles and insurance industry‟s expectations from other stakeholders like the Government, Regulator, National Reinsurer, Reinsurers dealing with the Indian industry, other entities like NDMA, RBI, SEBI etc.

Drawing up an agenda for future course of action: Setting actionable points and planning the course of action (with time lines) for evolving a theoretically sound and practically workable framework of appropriate Natural Catastrophe risk transfer mechanisms.

Venue:

Insurance Institute of India (Auditorium, 1st Floor),
C-46, G-Block, Near American Consulate,
Bandra-Kurla Complex, Mumbai – 400 051.
www.insuranceinstituteofindia.com

Nominations may be sent in the form attached to

Mr. M. S. Raikar, Assistant Secretary (Seminars),

Insurance Institute of India, C-46, G Block, Bandra-Kurla Complex,Mumbai-400 051

along with payments by at par cheque/demand draft.Cheque / DD should be in favour of “Insurance Institute of India”.

Nomination fee per delegate is Rs. 2,758/- (Rs.2,500/- plus Service Tax 10.3%).

Any correspondence on the subject may be sent to <[email protected]>. Tel. No: 022 26544222, Mobile: 09869466105,

Email address:<[email protected] >.