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Terra Seismic at AIR's 11th annual Catastrophe Insurance Conference Taipei 18th of July
 

Terra Seismic at AIR's 11th annual Catastrophe Insurance Conference Taipei 18th of July

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Terra Seismic introduces novel solutions for short term earthquake risk assessment at AIR's 11th annual Catastrophe Insurance Conference Taipei 18th of July, 2013

Terra Seismic introduces novel solutions for short term earthquake risk assessment at AIR's 11th annual Catastrophe Insurance Conference Taipei 18th of July, 2013

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    Terra Seismic at AIR's 11th annual Catastrophe Insurance Conference Taipei 18th of July Terra Seismic at AIR's 11th annual Catastrophe Insurance Conference Taipei 18th of July Presentation Transcript

    • Earthquakes, Insurance and Reinsurance Terra Seismic: Novel Earthquake Risk Assessment And New Financial Solutions For Insurance and Reinsurance Industries If you know the time and location of shortly forthcoming big earthquakes, preparation can substantially reduce human misery and losses. Insurers, reinsurers, risk officers, asset managers can use this information to mitigate risks and avoid huge losses.  Oleg Elshin, oleg.elshin@terraseismic.com
    • Terra Seismic Plc is a Jersey based High Tech company that provides services for short , mid- and long-term earthquake forecast across the Globe. The Terra team uses proprietary satellite-based technologies and unites leading international geoscientists with financial experts in developing novel solutions for insurance and reinsurance industries, financial markets players, governments, early warning systems (EWS), Large Catastrophe Modeling Applications, and Disaster Risk and Response (DRR). Ultimately, we are interested in preparing all players for impending earthquakes – we believe that creating new insurance markets and deepening old ones is one of our main priorities. Terra Seismic(Terra): Summary
    • Date and Time of the forecast (UTC) Latitude, degrees Longitude, degrees Magni- tude Region Lag Forecast results The real magnitude(days) 5 April 2013 15:00 35.00±1.5 135.00±1.5 6 Japan 7 4/12/13 20:33 5.8 www.terraseismic.com – unique, up to 30 days short-term global earthquake forecasts: Example from Japan Realized epicenter Terra’s forecast radius (dangerous area) On the 5th April Terra issued forecast for 6M earthquake in Japan with below forecasting data (blue): Seven days later, on the 12th April, an M5.8 earthquake (red) hit the defined area and 33 people were injured (9 seriously) – 4151 houses damaged, 2 destroyed.
    • Date and Time of the forecast (UTC) Latitude, degrees Longitude, degrees Magnitude Region Lag Forecast results The real magnitude(days) 4th June, 15:00 44.00±1.5 11.00±1.5 5+ Italy 16 6/21/13 10:33 5.3 www.terraseismic.com – unique, up to 30 days short-term global earthquake forecasts: Example from Italy On the 4th June Terra issued forecast for M5+ earthquake in Northern Italy with below forecasting data (blue): Sixteen days later, on the 21st June, M5.3 earthquake (red) hit the defined area. Statistically, there is just a 4% chance of forecasting 21 June 5.3M event at random! Realized epicenter Terra’s forecast radius (dangerous area)
    • Date and Time of the forecast (UTC) Latitude, degrees Longitude, degrees Magnitude Region Lag Forecast results The real magnitude(days) 3/5/13 14:00 29.00±1.5 52.00±1.5 5.5 Iran 35 4/9/13 14:44 6.3 Realized epicenter www.terraseismic.com – unique, up to 30 days short-term global earthquake forecasts: Example from Iran On the 3th March Terra issued forecast for M5.5+ earthquake in Iran with below forecasting data (blue): Terra’s forecast radius (dangerous area) Bushehr atomic plant On the April 9th , 35 days later a M6.3 earthquake (red) hit in the defined area, close to Iran Bushehr atomic plant. Luckily, no serious damage. Persian Gulf is the world’s most important oil transportation artery. What will be consequences for oil prices & financial markets if future event was more serious?
    • Date and Time of the forecast (UTC) Latitude, degrees Longitude, degrees Magnitude Region Lag Forecast results The real magnitude(days) 22th June, 15:00 2.00±2.0 100.00±2.0 5 Indonesia 13 6/21/13 10:33 6.1 www.terraseismic.com – unique, up to 30 days short-term global earthquake forecasts: Example from Indonesia Sample: On the 22th June Terra issued forecast for M5 earthquake in Indonesia with below forecasting data (blue): On the July 6th , 13 days later M6.1 earthquake (red) hit in the defined area in the sea, close to Kuala Lumpur, Malaysian capital and big financial center. What will be consequences for local financial markets. We have shown a few examples, but we have hundreds more and you can access these via our website. Terra’s forecast radius (dangerous area) Realized epicenter Kuala Lumpur
    • Terra’s M7.0+ Forecasts and Their Realization Since late 2012
    • An earthquake is an enormous release of energy. However this energy is not released only when the event occurs, but also during several stages before the earthquake. Release of this excessive energy leads to: The appearance of abnormalities (thermal, ionic, etc.) in the atmosphere near the location and timing of a future earthquake. These abnormalities can be detected by today’s satellite earth observation systems and ground based instruments. by observations of Pre-Earthquake Phenomena from satellite earth observation systems How can earthquakes be forecasted 20-30 days before they occur?
    • Earthquake alerts for Taiwan, M5.5 June 29, 2013. Alerts were issued on June 7 (-22 days) An example of Terra’s Scientific Process: Taiwan Alert Map Shake Map June 29
    • New financial solutions for Insurers and Reinsurers Thanks to modern satellite technologies, now earthquake are becoming detectable in the short-term up to 30 days before strike What are the implications of this new disruptive knowledge for insurers and reinsurers? In next slides we would like just outline some new business opportunities that are now emerging
    • Now imagine you receive this alert from Terra Seismic: Greater than M7.0 EQ, on a 100 km radius that encompasses Tokyo in the next 30 days with confidence greater than 60%… Forecasting Services: New solutions for insurers and reinsurers Assessing Earthquake Risk in Taiwan, AIR July 2013 ”Current Research tells us that the maximum magnitude along these faults is in the range of 7.0-7.2 and that the annual likelihood for these earthquakes to happen is below 0.15% per year – equivalent of a return period of 700 years…” Incredible technology already exists to measure long term earthquake risk:
    • Terra strategy N1: Use markets to hedge against your exposed seismic risk and behave rationally pre and post market movements If you have specific exposure to Japanese risks, you can use market movements to hedge these risks! March 11, 11 Tohoku EQ -TEPCO, Tokyo Electric Power Company, which lost $35 billion in market cap -capitalization of five global stock exchanges fell by $1.2 trillion However, there were also hedging opportunities!
    • Terra Strategy N1: continued Korean Market experiences a positive trend after event There are neighboring countries and related industries that will have strong increases in expectations Market will recover after 2-3 weeks Exiting and re-enter at right moment Another example is construction industry in Japan The spread of equity between construction and insurance indices (red) shows that there are clear opportunities to limit your losses.
    • Terra Strategy N2 Delay investments and adjust strategic business decisions Stay ahead of changes in the markets -Big insured losses can make players more risk averse of a repeat event and increase their insurance demand -A recent event can make some players less risk averse as they see a repeat event unlikely Whatever the market, forecasting services help you stay ahead! Terra Strategy N3 New Consumer products based on Terra Forecasting Services - Customize commercial property insurance with Terra services - Example: reduce claimable losses by spreading short term risk information to your clients with limited coverage and deductible property insurance. This allows them to prepare their properties. New ways to engage existing and potential clients!
    • Terra Strategy N4 Improve your reinsurance positions - Singular or dual global earthquake events have substantial impact on renewal prices - Guy Carpenter’s research (GC 2012 Renewal Report) 20-100% jump in renewal prices in East Asia post NZ and Japan 2011 earthquakes -All players: stay ahead of fluctuations in prices by keeping track of mega events near renewal periods that will cause spikes in rates Terra Strategy N5 Stay ahead in the Cat Bond Market We see a market growing in capitalization and reception! -A one month pricing of risk gives you the ability to hold your own or exposed bonds after securitization and readjust expected loss as forecasts become available -Hurricane market has less uncertainty and more capitalization, is this the future? Katrina
    • Terra Forecasting and the Bottom line: Example, Reinsurance Industry -Terra’s services can increase value of reinsurance industry -With a chronically high CoV and low ROE, the industry is relatively less attractive and under capitalized than it should be -Our services all for business to grow and shocks to be smoothened Bottom line? ROE and Variation by Type of Industry Average ROE Coefficient of Variation Commercial 9% 0.59 Specialty 10.50% 0.60 Reinsurance 8.70% 0.72 Personal 13% 0.33 Swiss RE Reinsurance Index for 2011 Tohoku EQ Thai Floods Source: AON BENFIELD REINSURANCE AND MARKET OUTLOOK JANUARY 2012 NZ EQ
    • Insurer Reinsurer Spreading Risk Terra Seismic Annual subscription on EQ alert services Short-term EQ aIerts New Market Model Reinsurer Reinsurer Domestic Catastrophe Pool Our vision is a supply side of earthquake risk that is more efficient: -Domestic pools do not need to hold large reserves unless there is imminent danger and this money can be directed to areas of high domestic opportunity cost -Markets will be more complete as month long agreements can be made between parties to insure against risk -As pools become more efficient and can relax their risk aversion, they will attract stronger outside investors, private backers, and multinational good faith Terra’s vision of the Earthquake risk market Insured Company Insured Company Insured Company Spreading Risk
    • Main Take away – Short term Earthquake risks are now manageable • Earthquakes are becoming detectable now, with certain level of confidence and many of future big earthquakes will be forecasted 30 days before they will strike • Industry can complement historical, long run likelihoods of EQs with short term dynamic risk on 30 day intervals • uncertainty will persist beyond this period and most markets remain unchanged • Multiple strategies for all players to benefit from our services • Vision of a structure where the entire market is more efficient • We hope to bring life saving information in the next stages of our product development, and stay tuned for more from Terra Seismic Plc.!
    • 19 Free trial access to Terra’s site www.terraseismic.com : Please email us info@terraseismic.com to get free trial access to our site and see global forecasts for shortly upcoming earthquakes on www.terraseismic.com And, Welcome to the New Planet - New Earth where many future earthquakes may be forecasted up to 30 days before they will strike! Thank you!
    • Tim Jenkinson, Independent Chairman Tim Jenkinson is a Professor of Finance and head of the finance faculty at Saïd Business School, University of Oxford. He is also the Director of the Oxford Private Equity Institute. His areas of expertise include private equity, initial public offerings (IPOs), institutional asset management and the cost of capital. Jenkinson is the leading European expert on IPOs and has conducted extensive research on the conflicts of interest inherent in the relationships between investment banks, investors and companies. His research has revealed how and why international investment banks charge significantly higher IPO fees to American companies compared with their European counterparts. This research on IPO discrepancies was published in the Journal of Finance and has attracted considerable media attention from publications such as The Economist, Reuters, The Financial Times, The New York Times, Wall Street Journal, Bloomberg, CNN, Time and various appearances on business new channels. Jenkinson is one of the foremost academic experts on private equity – an industry that is often misunderstood by the general public and financial experts alike because it does not operate in the public domain. His private equity research has shown that, on average, historical private equity returns have outpaced public market returns by 3% to 4% each year, explaining the appeal of this little known industry. His research has demonstrated how the capital structure of leveraged buyouts can impact private equity performance. This research led the UK Treasury Select Committee to call upon him to provide evidence when it held investigations into the private equity industry. Jenkinson speaks at industry and academic conferences around the world and teaches a number of private equity classes in association with organisations such as the CFA Institute. Jenkinson is Chairman of the economic consulting firm Oxera, and an academic advisor to KPMG's Global Valuation Institute. He has consulted for a large number of companies, regulators, government agencies and industry associations. He is also a Professorial Fellow at Keble College, University of Oxford, a Research Fellow of the Centre for Economic Policy Research and a Research Associate of the European Corporate Governance Institute. Jenkinson joined the finance faculty at Saïd Business School in 2000. He previously worked in the economics department at the University of Oxford, which he joined in 1987. He has also spent periods as a Visiting Professor at Dartmouth College. He studied economics as an undergraduate at Cambridge University, before going as a Thouron Fellow to the University of Pennsylvania, where he obtained a Masters in Economics. He then returned to the UK and obtained a DPhil in Economics from Oxford.
    • Oleg Elshin, President, CEO Oleg Elshin has over 19 years of successful experience in investment banking, including management positions at leading Russian firms such as Uralsib, Rosbank and Univer Capital. In 2006, he managed an Oxford University strategic consulting group on the London Stock Exchange. Oleg participates in many London Stock Exchange CIS conferences and has published many articles in the leading CIS business press. He is a regular speaker from Russia & CIS at Oxford Annual Private Equity Forum. Since 2011 Oleg is actively involved in satellite based global earthquake forecasting project, which led to creation of Terra Seismic Plc in August 2012. Oleg graduated from Moscow Mendeleyev Chemical-Technological Institute and holds degrees from Moscow State Law Academy and Oxford University (MBA).     Contacts: oleg.elshin@terraseismic.com, info@terraseismic.com Oleg Elshin’s presentation at Oxford University