american international underwriters mediterranean, middle east & south asia middle east...

AMERICAN INTERNATIONAL UNDERWRITERS

MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA

Middle East Insurance Forum 2006

Paul JewellRegional VP, Property & EnergyMiddle East, Mediterranean & South Asia

21st March 2006

The Impact of Natural Disasters on Regional Trends in Insurance

2AMERICAN INTERNATIONAL UNDERWRITERS


Topics

Global Warning

Hurricanes

Typhoons

Earthquake/Tsunamis

Impact on Insurance and Reinsurance

How does all this relate to the Middle East?



Global Warming

Mean annual surface air temperature risen by 0.5ºC (0.9ºF) since 1960.

Rise in Intensity of Events

World-wide impact : US Gulf Coast, Japan, Australia, Europe, Pakistan, India, Sri Lanka and Thailand ..etc

Predictions of increasing water levels due to the melting of the polar ice caps



Hurricanes

Long term average 9.6 per season with 2 or 3 becoming intense hurricanes.

20 to 30 year cycles

Latest started in 1995. Another 10+ years of instability

Increased flooding , mudslides and storm surges



Hurricanes

Hurricane Katrina – 3rd strongest storm to make landfall in the US

Estimated Insurance costs $40bn to $55bn

Economic loss from US windstorms in 2005 estimated at $174bn

7.5% of US non-life premium volume

Add the impact of 2004, estimated insured losses range from $20bn to $40bn (Charley, Frances, Ivan and Jeanne)



Typhoons

Japan affected by approx 2.6 Typhoons a year over past 30 years

2004 was considered a 1 in 140 year event

Hong Kong has been hit by a strong Typhoon on average every 5.7 years. Is 2006 the next?



Earthquakes

Annual Average is 134 per annum (6.0 to 6.9 on the Richter scale)

Major earthquakes (7.0 to 7.9) 17 per annum

1 per annum exceeding 8.0 Generally 7.5 magnitude is

required to generate a Tsunami Average is 6 Tsunamis per 100

years in the Pacific Ocean. Atlantic Ocean considered a 1 in

10,000 year event



Earthquakes

In the last decade destructive Tsunamis seen in Nicaragua(1992), Indonesia (1992,1994,1996), Japan (1993), Philipines (1994), Mexico (1995) Peru (1996, 2001), Papua-New Guinea (1998),Turkey (1999) and the most recent in Indonesia (2004)

In 2005 earthquakes were seen close to the region. Pakistan, Iran, Turkey, Greece and Indonesia

Some tremors felt in Dubai! No or little warning prior to an event Larger potential for devastation of

property and human life



Impact on Insurance & Reinsurance

2005 total economic losses estimated at $230bn from catastrophes alone

United Nations project that weather related losses will impact the industry to the tune of $150bn over the next decade

Weather patterns are changing with extreme events seen across the globe

A number of insurers ‘blew’ through their catastrophe protections (India and Sri Lanka particularly)

Increased insurance penetration in developing countries could raise the potential insured losses




Global Insurers and Reinsurers have been impacted

Fresh capital has been required to sustain some operations

PXRE is the highest profile casualty

Retrocession market has become limited

Price increases seen in US markets

Oil and Petrochemical industry in the US Gulf seeing 4 fold increase in premiums

Insurers reviewing their catastrophe modeling




Awareness has prompted increase catastrophe purchase

Reinsurers are requesting a premium for catastrophe prone areas.

Insurers taking higher retentions

Improvement in terms seen in the US and some regions

Cash flow underwriting and rate reductions noted in other markets (India, Sri Lanka and Pakistan)

Mergers and acquisitions are now being reported. Swiss Re takes over Gen Re is the highest profile.



How does all of this relate to the Middle East?

What is around the corner?

Will increasing sea levels have an impact on the reclaimed land developed areas?

Is a Tsunami a threat?

Are there exposures that haven’t been modeled yet?

Snow in the UAE last year was a first?

Will new capital in Bermuda reach the Middle East?



How does all of this relate to the Middle East?

Is there sufficient ROI for reinsurers in low risk areas?

Some Lloyds syndicates have increased their premium threshold. Focus on US and well rated business

Reinsurers focus is on the US but will turn to other areas. Expect pressure for rate movement at the end of 2006/7

If 2006 is a bad catastrophe year their will be an impact on the industry as a whole.

Impact will be felt in 2007.



Thank You

Questions?

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