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
MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
Topics
Global Warning
Hurricanes
Typhoons
Earthquake/Tsunamis
Impact on Insurance and Reinsurance
How does all this relate to the Middle East?
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MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
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
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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
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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)
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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?
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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
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MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
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
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MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
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
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MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
Impact on Insurance & Reinsurance
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
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MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
Impact on Insurance & Reinsurance
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.
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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?
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MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA
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.
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Thank You
Questions?