Category Archives: Disaster Risk Reduction

Coming Together to Build a Resilient India Agriculture Insurance Sector

India is an agricultural powerhouse, ranked second in the world in terms of its level of agricultural output. With 58 percent of the rural population of India reliant on agriculture for their livelihood (and a total figure of 2.2 billion across Asia) plus more than fifty percent of total working population of India employed in the food industry, ensuring that farmers are resilient and can rebuild after crop setbacks is a top priority for the country.

This challenge is being tackled. For India, agricultural insurance schemes such as Pradhan Mantri Fasal Bima Yojana (PMFBY) are ambitious, continually pressing to reduce the protection gap, with a target to cover 50 percent of gross cropped area over the next couple of years. But the challenge to further close this gap continues, and it was central to the theme for the Fifth Asia Agriculture Insurance Conference recently held in New Delhi — entitled “The Future of Agro Insurance: The Impact of Climate Change, Technology and Inclusive Insurance.”

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EXPOSURE Magazine: Essential Reading in Changing Times

The pace of change continues to accelerate across the insurance industry, whether it is from technology, regulation or market developments, and EXPOSURE magazine helps risk professionals to explore some of the key drivers of these changes.

In this latest edition available for distribution at the Monte Carlo Rendezvous and online, the lead story looks at the recent market activity from Tower Insurance in New Zealand. By adopting high-definition earthquake modeling, Tower gained the confidence to launch risk-based pricing for its customers, providing savings for the majority of policyholders, but increases for others. EXPOSURE looks at the implications of Tower’s actions and how this could affect the New Zealand insurance market.

High resolution modeling has also helped Flood Re in the U.K. to better understand how it can work towards its remit of delivering a flood insurance market based on risk-reflective pricing that is affordable to policyholders. EXPOSURE shows how innovative use of modeling could guide Flood Re when recommending investment measures to protect properties at risk of flooding.

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Protection Gap Analytics: The Role of Risk Modeling

This is the final blog in a series of four blogs examining three potential “protection gaps” and the importance of “protection gap analytics”. To read the first blog post in this series, click here.

We are not going to be able to take effective action to reduce any of these three protection gaps unless we can first learn how to consistently measure the difference between insured and total loss. Such measurement means we can know the current situation as well as set appropriate targets and monitor progress in reducing the gap. It can also help to focus investment and action.

At present, the only form of measurement is to acknowledge the difference between insured loss and the estimated total economic loss once the claims have settled, one or two years after a significant disaster.

In the same way that probabilistic catastrophe risk models were developed to enable insurers and reinsurers to look beyond the latest event loss, so the same models are now required to monitor the protection gap. This is the focus of “protection gap analytics”.

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Japan: Waking Up to Flood Risk

Hemant Nagpal, director, Model Product Management, RMS

Manabu Masuda, senior director, Modeling, RMS

Junichi Sakai, lead modeler, Model Development, RMS

Many factors made the recent devastating flooding and subsequent landslides and mudslides in Japan during July stand out as a defining event. From the intensity of the rainfall, the extent of the area affected and the loss of life, the sheer scale of this event was summarized by an official from the Land, Infrastructure, Transport and Tourism Ministry in Japan, who said “This is the first-time damage has extended to such a wide area since the (2011) Great East Japan Earthquake.”

As of July 16, Japan’s National Police Agency reported that 219 people had been killed, and many remain missing. Data provided on July 20 from the Fire and Disaster Management Agency (FDMA) reported damage to around 40,000 buildings across 31 prefectures, and just over half of these prefectures had 50 or more buildings damaged. Some of the worst-hit areas include Okayama, Fukuoka, Hiroshima, Ehime, Kyoto, Yamaguchi, Gifu, and Kochi.

At least 270 elementary and junior high schools were damaged; the commercial sector experienced widespread damage and destruction from landslides and rivers breaching their banks or defenses. Operations were suspended at Mazda Motor, chemicals giant Teijin and brewers Asahi Shuzo, among others, disrupting supply chains far from the disaster areas. Only 30 percent of large enterprises account for flooding in their continuity plans, according to recent Cabinet Office survey.

Overall, this event is the nation’s deadliest weather disaster since 322 people were killed in floods and landslides across western Japan in July 1982. Early estimates indicate economic losses could be higher than US$1 billion with significant impact on manufacturing and tourism. The insured losses may take some time to develop. What caused this event to happen?

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Where Is Insurance in the Post-Grenfell Tower View of Fire Risk?

The first professionals on the stand in the Grenfell Tower Inquiry were the London Fire Brigade, quizzed on their lack of training around managing evacuation from the devastating tower block fire in North Kensington, West London on June 14, 2017. Coming soon, the inquiry’s focus will turn to the architects and fire engineers, the manufacturers of cladding material and the regulatory procedures for determining safety.

Yet, one actor conspicuously missing from this parade of experts is insurance.

You might think that insurance would, by now, be leading the agenda in calculating the fire risk to tower blocks and showing how mitigative action, such as removing or replacing flammable cladding, would directly convert into both lower risk and lower premiums. For this calculation around fire risk has the potential to drive other responses, including which buildings are too dangerous to be habitable.

Yet this calculation cannot come from empirical data on fire losses, as supports most actuarial fire pricing, because this fire is without precedent, at least in the U.K. Instead it will have to be the product of “large building” stochastic fire risk modeling.

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Resilience 2018: Driven by Purpose

There is nothing quite like a “banging EP” to make me feel young again. But that wasn’t the only aspect of my most recent trip to Miami that brought out the millennial in me.

If you missed Exceedance 2018 a few weeks back, you probably also missed Resilience 2018. Embedded every year within Exceedance, RMS holds a space for policymakers and business leaders to collaborate to a very important end: ensuring local communities and regional economies are resilient to the shocks and stresses they face.

Much has been written about how millennials seek work that is meaningful (Schullery, 2013); work which solidifies their self-efficacy (Chalofsky + Cavallaro, 2013). I also blog about the relationship between aims and actions; between purpose and profit.

And there’s some truth in the generational stereotypes. After all, research suggests that impact investing continues to “skyrocket.”

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China Reinsurance: Domestic or Global Expansion Both Require Risk Modeling

Paul Burgess, Client Director, Asia-Pacific, RMS

Erica Xue, Senior Product Manager – Model Development, RMS

In a country that according to the United Nations, between 1995 and 2015 experienced the largest number of natural disasters globally, and with these losses largely uninsured, China is at the start of a journey to close its protection gap between economic and insured losses — during a sustained period of rapid GDP growth. Examples such as the devastating Sichuan earthquake in 2008 which killed more than 80,000 people and caused US$125 billion in economic losses saw just 0.3 percent of losses covered by insurance. Floods in southern China during the summer of 2016 saw economic losses of US$20 billion, the second costliest event of the year. But again, according to Munich Re, just two per cent was insured.

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EXPOSURE Magazine: Looking Back, Looking Forward

The latest edition of EXPOSURE is essential reading for risk professionals, as we look back at what can be learned from last year’s events and look forward to the future including new challenges faced by the global risk management community and new opportunities to capitalize on.

EXPOSURE offers a unique perspective with a clear mission “… to provide insight and analysis to help insurance and risk professionals innovate, adapt and deliver.” And with a new North Atlantic hurricane season nearly upon us, and memories of HIM (Hurricane Harvey, Irma and Maria) fresh in the industry’s collective consciousness, EXPOSURE talks to the industry and paints a picture of a mature, responsible insurance sector that managed HIM with certainty and confidence. Cyber has also demonstrated its potential as a global systemic risk, and EXPOSURE looks at how events such as an outage of a major cloud services provider could generate economic losses as high as Superstorm Sandy.

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Exceedance: Time to Make Risk More Transparent

As the sun shone over the Biscayne Bay at the start of the second full day at Exceedance, our keynote guest speaker, Jeff Goodell, energy and environmental expert, investigative journalist and author of numerous books including The Water Will Come asked a provocative question in his opening slide. It simply said, “Goodbye Miami?”

Jeff said that he was at home being in the company of fellow “catastrophists” and the risk management community at Exceedance, but this is not always the case. When talking about climate change and sea-level rise, he sometimes felt as if he was Richard Dreyfuss in the movie Jaws. Dreyfuss played oceanographer Matt Hooper, a character who continually warned the Mayor of Amity Island to close the beach because of the risk of shark attacks. The Mayor ignored the advice, due to the economic impact of closing the beach … but [spoiler alert] the shark kept coming. Jeff remarked that sea-level rise is the shark, and it’s bigger and more dangerous than we first anticipated.

Jeff Goodell presenting at Exceedance

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Exceedance: Client-focused Transformation

The first full day of Exceedance clearly set the direction that RMS is taking towards transformation — as a strategic partner helping clients to succeed in a time of rapid change. Karen White, chief executive officer for RMS, made her keynote debut on the Exceedance stage, sharing her background working with technology companies during similar game-changing times, and expressing her excitement of the here and know and what lies ahead.

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