'Secondary perils?' Impact of non-modeled risks to the insurance industry in Southeast Asia

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Neena Saith presented on the topic of Secondary Perils at the 11th Conference on Catastrophe Insurance in Asia, held in Taiwan on July 18-19.

Neena Saith presented on the topic of Secondary Perils at the 11th Conference on Catastrophe Insurance in Asia, held in Taiwan on July 18-19.

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  • 1. ‘SECONDARYPERILS?’IMPACT OFNON-MODELEDRISKSTO THEINSURANCEINDUSTRYIN SEASIA Neena Saith Director, Model Solutions Robert Muir-Wood Chief Risk Officer
  • 2. 60% OF TOTAL INSURED LOSSES WERE NOT CAPTURED BY MODELS IN 2011
  • 3. ©2013 Risk Management Solutions, Inc. 3 STEPS TO GREATER RESILIENCY Know your exposure Understand scenarios Quantify your risk Do I have a concentration of exposure that could be impacted? Are there scenarios that could impact multiple locations? What techniques can I use to quantify my risk?
  • 4. RMS RISK EXPOSURE ACCUMULATION CATALOGUE (RMS REACT) REACT now to proactively manage your non-modeled risk RMS Risk Exposure Accumulation Catalogue Industrial cluster database Global tsunami zones Volcanic eruption risk Extreme liquefaction areas Asia flood footprints
  • 5. Model gap analysis What’s in and what’s out of a cat model
  • 6. BEYOND THE MODELED WORLD - MISSING SOURCES OF RISK SUPPLEMENTAL CAUSE OF LOSS Same cause of loss, same region, supplemental causes of loss: Hurricane Irene UNMODELED CAUSE OF LOSS Same region – separate unmodeled cause of loss: China winter storms UNMODELED REGION MISSING EXTREME PARAMETERIZATIONS Same cause of loss, same region, missing extreme parameterization: Tohoku Earthquake Cambodia Flood
  • 7. Type 1 Additive perils to events already modeled (‘blind spots’)
  • 8. TAIWAN PERIL AUDIT What perils is Taiwan exposed to? What is and is not modeled in Taiwan? Non-modeled Non-modeled Non-modeled Models available Models available but missing extreme parameterisation Models available
  • 9. SECONDARY PERILS FROM M9 EARTHQUAKES CLOSE TO TAIWAN Major Tsunamis >10m Extreme landsliding Strong long period ground motions Major earthquake aftershocks
  • 10. IMPLICATIONS OF MAGNITUDE 9 EARTHQUAKE ON THE RYUKYU SUBDUCTION ZONE >10m  Tsunami  
  • 11. IMPLICATIONS OF A MAGNITUDE 9 EARTHQUAKE ON THE MANILA ARC SUBDUCTION ZONE >10m   Tsunami  
  • 12. Kaohsiung, SW Taiwan – largest harbour in Taiwan – c 1 million people live in coastal districts Frontline >10m Tsunami in Manila Arc M9 EQ
  • 13. Extent of aftershocks after M9 earthquakes adjacent to Taiwan Taiwan to same scale
  • 14. LANDSLIDE RISK
  • 15. Disrupted communications expected after M9 earthquake close to Taiwan
  • 16. ©2013 Risk Management Solutions, Inc. City centre looting OTHER POTENTIAL EARTHQUAKE CORRELATIONS Professional liability Contamination liability
  • 17. ©2013 Risk Management Solutions, Inc. TYPHOON  SOULIK,  12  JULY  2013  
  • 18. ©2013 Risk Management Solutions, Inc. TYPHOON FLOOD AND MUDSLIDE DAMAGE Damage to buildings in Kaohsiung county (left) and Taitung county (right), Taiwan after Typhoon Morakot in 2009
  • 19. Secondary perils – Garbage landslide after typhoon: Baguio, Philippines 2011
  • 20. Type 2 Missing extreme parameterizations ‘Hidden peaks’
  • 21. RMS STUDY IDENTIFIES 15 EQ SOURCES CAPABLE OF M9+ EVENTS - POSSIBILITY FOR DAMAGE BEYOND CURRENT MODEL PREDICTIONS 8 1 2 34 56 7 9 10  11   12   13  14  15  
  • 22. ULTRA LIQUEFACTION Stress test accumulations in high liquefaction potential locations
  • 23. Type 3 Missing perils (in modeled countries) ‘The overshadowed’
  • 24. •  Rapidly sinking delta •  Large areas of city below sea level •  Over extraction of groundwater •  Poorly maintained flood defences New Orleans 2005 •  In the path of frequent tropical cyclone storm surges •  Home to 450,000 people •  Well-rehearsed evacuation plans HIDDEN GULF OF THAILAND STORM SURGE RISK: MANY SIMILARITIES WITH NEW ORLEANS Bangkok 2015 •  In the path of infrequent tropical cyclone storm surges •  Home to 8.5 million people •  No material evacuation plans Five typhoons have entered the Gulf of Thailand since 1950 Wind profile from TC Surge levels from TC
  • 25. STORM SURGE FLOOD IN BANGKOK Cyclone track 2011 warning that Bangkok “will sit under nearly 2m of water by 2030” Feb 11th 2013 Deputy Prime Minister Plodprasop Suraswadi "After April we'll start studying this project full steam”
  • 26. ©  Jenkins  et  al.,  2012   A simulated eruption from Pinatubo: §  VEI 6 §  Northwesterly winds §  Ash thicknesses ~200 mm in central Manila (for this scenario) §  Only maps thicknesses for urban areas (>400 people/km2). White cells receive no ash or contain <400 people. §  A further 4 volcanoes lie within 200 km of Manila Ash thicknesses (log scale): >10,000  mm     (10  m)   1  mm   100  mm   Pinatubo   Manila   Jenkins, S., Magill, C., McAneney, J. and Blong, R., 2012. Regional ash fall hazard I: A probabilistic assessment methodology. Bulletin of Volcanology, 74(7): 1699-1712. Jenkins, S., McAneney, J., Magill, C. and Blong, R., 2012. Regional ash fall hazard II: Modelling results and implications. Bulletin of Volcanology, 74(7): 1713-1727. Susanna.Jenkins@Bristol.ac.uk VOLCANIC RISK OFTEN OVERLOOKED!
  • 27. Type 4 Non-modeled territories ‘Cold spots’ (the perils of diversi-fiction)
  • 28. GLOBAL PERIL AUDITS Saudi Arabia Earthquake Urban flash flood Oman Cyclone (flood and wind) Flash flood Tsunami Brazil Flash flood Major river flood
  • 29. KNOW YOUR EXPOSURE Determine if you are insuring risks in industrial clusters Sectorial clusters of exposure expanding across Asia
  • 30. PERFORMING A RISK AUDIT •  Check coverages •  Geocode everything •  Understand the motivations for insurance purchase •  Evaluate the risk management culture Know your exposure Potential for Correlation Understand scenarios
  • 31. OWN YOUR VIEW OF RISK Build greater resiliency into your risk management framework by managing risk outside the models Know your exposure Understand scenarios Quantify your risk RMS(one)/exposure analysis REACT scenarios REACT return period hazard maps Fully probabilistic loss model
  • 32. ©2013 Risk Management Solutions, Inc. “Risk management, we believe, should be about lessening the impact of events we don’t understand” - Naseem Taleb, Harvard Business Review