The document discusses the significant impact of natural catastrophes on insurance markets, particularly highlighting the substantial losses from disasters like hurricanes and earthquakes. It outlines challenges insurers face, such as inadequate resources to cover catastrophic losses, and emphasizes the role of reinsurance and catastrophe modeling in effective risk management. Moreover, it suggests collaborative efforts among governments, the industry, and society to create simpler insurance products and processes for improved future outcomes.

1. GROUP 3
NAT-CAT
UNDERWRITING

2. Natural Catastrophe
US was hardest hit
hurricanes Harvey,
Irma and
Maria(HIM) 2017
Property & Casualty
Reinsurance net
loss.
$306bn $652bn
Global Level
$10b
n
2015NEPAL
EARTHQUAKE
$1bn
UTTRAKHAND
FLOOD 2013
TotalEconomic
LossesOfTheYear
2017
$136bn
INDIAN Level
2016 VARDAH CYCLONE
$120bn

3. THE CATASTROPHIC EFFECTS OF
NATURAL DISASTERS ON INSURANCE
MARKETS
• Catastrophic losses tends to be lumpy.
• First, because the losses arise from a small number of lumpy events, the insurer may not have
sufficient resources to cover the losses.
•
The firm may suffer losses well in excess of the value of the premiums that it charged for the
coverage
•
In the absence of adequate reinsurance, the firm may go bankrupt or may choose to exit a state in
which there is a substantial exposure to such catastrophic risks.
• A third phenomenon linked to natural disasters is that of learning about the risks over time.
• To explore the effects of catastrophic risks, a series of regression analyses of the effect of these
various variables on loss ratios(flosses incurred divided by premiums earned.), premiums, and
losses.

4. How to overcome as an insurer
(Catastrophe modeling)
• Effective catastrophic risk management
• Improved underwriting and reinsurance decisions
• Assessing quality of the underlying exposure data used for catastrophe risk
• Improvement of exposure data quality
• Helps in improving decision-making across the enterprise
• Thus provides a competitive advantage
Fig. :Structure of Catastrophe Model
Vulnerability
Hazard
Loss
Inventory

5. ROLE OF REINSURERS
1. Impact of disaster is severe and is beyond the scope of Insurance companies >Reinsurance Contracts.
2. The reinsurance could be provided by Reinsurers or Multi-lateral agencies.
3. Munich Re is the world’s largest reinsurance company with over 5,000 customers in 160 countries.
4. Transferring catastrophic risks to capital markets through the use of catastrophic bonds is mechanism.
5. Reinsurers usually bear 55–65% of insured losses when a large natural disaster occurs. They diversify concentrated risks
among themselves and pass a fraction of losses on to the broader financial market, while ultimately retaining most
catastrophe-related risk.
6. The mechanism works as follows:
• Primary insurance company pays a premium to purchase a Catastrophe Reinsurance contract from Reinsurance Company.
• Reinsurance Company then sells its bonds in an amount equal to the catastrophe reinsurance contract issued to insurance
company. These are called Catastrophic Bonds.
• The proceeds from the bonds sold by reinsurance are then placed in a trust to securitize the reinsurance contract. Interest is
earned on the proceeds placed in the trust.
General Insurance Corporation (GIC) and the major European professional reinsurers based in Continental Europe and Asia
performs the lead role in reinsurance. GIC Re continues to have the leading presence overall in the Indian market.

6. • Geocoding.
• Mobile Exposure
• Use of Social Media and crowd sourcing.
• Insuring the obvious.
• Smart Analytics.
• Location Intelligence. (e.g. NATHAN Risk suite)
WHAT ELSE SHOULD BE DONE?

7. What we need for a happy
future
• All parties working together :
• Government
• Industry
• Society
• We should have :
• Simple products
• Simple distribution channel
• Simple administrations
• Simple claims process

8. THANKS