p8. mr warren chang - treif's role in managing...
TRANSCRIPT
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TREIF’sTREIF’s Role in Role in
Managing Catastrophe Risks in Managing Catastrophe Risks in TaiwanTaiwan
TREIF24 April 2014
Warren Chang PresidentTaiwan Residential Earthquake Insurance Fund
Agenda
l C h i k d i k Natural Catastrophe Risks and Risk Management in Taiwan
TREIF’s Role in Managing Catastrophe Risks
Future Prospects
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Taiwan Natural Catastrophe Risks
Taiwan is highly prone to NAT CAT risks
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Source: Natural Disaster, World Bank, 2005
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16 Number of Warning Number of Striking Taiwan
Typhoon Events in Taiwan(over past 5 decades)
Average typhoon warnings issued per year : 7
4
6
8
10
12
g yp g p y
Average typhoons striking Taiwan per year : 3.5
0
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58
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59
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60
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62
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63
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Source: Central Weather Bureau, Taiwan
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Flood Events in Taiwan
Average flood events per year over past decade:
Other perils
Average flood events per year over past decade:
• caused by typhoon: 5.5 (63%)
• caused by other perils: 3.3 (37%)
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Source: 1. Graphic chart: Dr. Wenko Hsu, National Central University
2. Data: National Fire Agency, Ministry of the Interior
Top 10 Typhoon/Flood Losses in Taiwan(over past two decades)
Date EventEconomic Loss(NTD Billion)
Insured Loss(NTD Billion)
Death/Missing
Jul 9 1994 Tim 3 8 N/A 23Jul. 9, 1994 Tim 3.8 N/A 23
Aug. 9, 1994 Doug 3.4 2.9 15
Jul. 29, 1996 Herb 14.8 3.7 73
Oct. 13, 1998 Zeb 6.2 N/A 38
Aug. 21, 2000 Bilis 7.0 N/A 21
Oct. 29, 2000 Xangsane 4.9 N/A 89
Jul. 28, 2001 Toraji 8.1 0.6 214
Remark: US$ 1 = NT$ 30
Source: 1. Directorate General of Budget, Accounting and Statistics2. Munich Re
3. Taiwan Insurance Institute
Sep. 15, 2001 Nari 4.9 16.0 104
Jun. 30, 2004 Mindulle 9.0 0.3 41
Aug. 7, 2009 Morakot 185.7 3.0 703
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Seismic Activities in Taiwan
Map of Epicenters since 1900
• 22,000+ earthquakes recorded in Taiwanevery year
• 500 of which are sensible
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• 20 of which are at ML 5+
Source: Dr. Wenko Hsu, National Central University
Date Epicenter ML Death InjuryBuildingsDamaged
N 6 1904 Chi i 6 3 145 158 3 840
Top 10 Earthquake Losses in Taiwan(over past century)
Nov. 6, 1904 Chiayi 6.3 145 158 3,840
Mar. 17, 1906 Minxiong, Chiayi 7.1 1,258 2,385 20,987
Jan. 5, 1917 Puli, Nantou 5.8 54 85 755
Apr. 21, 1935 Guandao Mt, Hsinchu 7.1 3,276 12,053 54,688
Jul. 17, 1935 Houlong, Miaoli 6.2 44 391 7,621
Dec. 17, 1941 Zhongpu, Chiayi 7.1 358 733 15,606
Dec. 5, 1946 Xinhua, Tainan 6.3 74 482 4,038
O t 22 1951 S th t H li 7 3 68 856 2 382
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Oct. 22, 1951 Southeastern Hualien 7.3 68 856 2,382
Jan. 18, 1964 Baihe, Tainan 6.5 106 653 40,965
Sep. 21, 1999 Chi‐chi, Nantou 7.3 2,444 11,305 105,479
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Natural Catastrophe Risk Management in Taiwan (1)
Government disaster prevention and response system A top‐down system commanded by central government with classified tasks
to be implemented:to be implemented:1) Disaster prevention 2) Disaster response 3) Post‐disaster recovery & reconstruction
Loss prevention Monitoring and early warning (catastrophe model & loss potential diagram etc.)
Land Planning and Supervision (prohibition and restriction on construction area) Building Code (flood control design & seismic design etc.)
Disaster Relief Fiscal Budgeting (annual & emergency budget)
Contributions/donations or emergency loans
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Financial Risk management (Insurance & ART) Commercial NAT CAT Insurance
Private Insurance Markets Statutory Catastrophe Insurance
Public‐Private Partnerships (PPPs) –TREIF Alternative Risk Transfer (ART)
Cat Bond
TREIF’s Role in Managing Catastrophe Risks
Background & Developments
Rationales
Function
Operations
Future Prospects
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21 Sep. 199921 Sep. 1999 A magnitude 7.3 earthquake, known as the “Chi‐Chi” earthquakestruck Nantou County in central Taiwan
July 2001July 2001 Article 138 1 Insurance Act was promulgated being the legal
Background & Developments
July 2001 July 2001 Article 138‐1, Insurance Act was promulgated, being the legal basis for Taiwan Residential Earthquake Insurance Program (TREIP)
Jan. 2002 Jan. 2002 Taiwan Residential Earthquake Insurance Fund (TREIF) was set up
1 Apr. 20021 Apr. 2002 TREIP scheme began to be operated
Aug. 2003Aug. 2003 TREIF issued the 1st Catastrophe Bond abroad in amount of USD100m.
Jan. 2007Jan. 2007 Scheme risk assumption limit increased from NT$50b to NT$60b.
Jan. 2009 Jan. 2009 Scheme risk assumption limit increased from NT$60b to NT$70b.
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Jun. 2010Jun. 2010 TREIF developed its own earthquake risk model‐“TREIF‐ERA”
Jan. 2012Jan. 2012 Max. Sum Insured increased from NT$1.2m to NT$1.5m & Contingent Living Expenses increased from NT$180,000to NT$200,000 with premium unchanged
Remark: US$ 1 = NT$ 30
Availability Affordability
Rationales
• Insurance for all
• Beneficial to all
Simplicity
• Insurance: Easy to buy
• Claims: Prompt to pay
Indemnity
• Premium affordable by general public
Statutory
• Non‐mandatory, non‐commercial scheme
• National scheme supported & guided by government
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• Basic coverage
• Basic sum insured• Government participating in
risk assumption5th
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Function
TREIF: Pivotal organization of TREIP Scheme To assume the residential earthquake insurance written by To assume the residential earthquake insurance written by
non‐life insurers and to manage the risk spreading mechanism
To administrate residential earthquake insurance underwriting, claimhandling, reinsurance placing, co‐insurance pooling and auditing
To conduct research, education, training, promotion, and statistics consolidation related to residential earthquake insurance
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Risk Assuming
(Initial Stage)
Risk Assuming
(Initial Stage)
Risk Assuming& Transferring (Scheme Manager)
PivotalPivotalOrganizationOrganization
Risk Assuming
(Initial Stage)
Risk Assuming& Transferring (Scheme Manager)
PivotalPivotalOrganizationOrganization
Operation Flow Chart
TREIF:
Pivotal
Organization
TREIF:
Pivotal
Organization
TREIF:
Pivotal
Organization
Home owners
TREIF
• Risk retention
• Reinsurance and/or ART
• Government’s risk assumption
Co‐insurance Pool
• Domestic non‐life insurers
• Central Re.
Risk Assuming & Spreading
Taking up
policy
Claimpayment
Ceding all to TREIF
Reinsurance loss
payment
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Non‐life insurersNon‐life insurersNon‐life insurers
Communication Platform
Non‐life Ins. Association
Co‐insurance Pool Committee
Consultation Platform
Development and Planning Committee
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Combined policy for Residential Fire and Earthquake Exposure Single policy covering both fire and earthquake risks
Perils Insured
Coverage
Perils Insured Earthquake shock and the perils below caused by earthquake:
Fire, explosion, landslide, subsidence, earth movement/rupture, tsunami, tidal waves or flood
Basic Cover (for each and every household insured) Valued on Replacement Cost with Max. Sum Insured at NT$1.5m (US$50,000) Contingent Living Expenses at NT$200,000 (US$6,667)
Annual Flat Premium NT$1,350 (US$45) (for corresponding sum insured of NT$1.5m)
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, ( ) ( p g )
Claim Criteria Building demolished as informed/ordered/acted by authority; or Building assessed by qualified adjuster, professional architect, structural/civil/geotechnical engineers as uninhabitable which requires demolition and replacement, with repair cost equivalent to or more than（≧）50% of Replacement Cost at time of loss
Risk Assuming and Transferring Mechanism
NT$70b
(2007(2007))
Scheme Limit NT$60b(US$2b)
(2009(2009))
Scheme Limit NT$70b(US$2 3b)
(2006(2006))
Scheme Limit NT$50b(US$1 7b)
(2012(2012))
Scheme Limit NT$70b(US$2 3b) Government
$(US$2.3b)
NT$40b(US$1.3b)
NT$20b(US$0 67b)
NT$56b(US$1.87b)
Tier 2
TREIF(NT$57.6b)
(US$1 9b)
(US$2b)
Tier 2
TREIF(NT$67.2b)
(US$2.2b)
(US$2.3b)
Tier 2
TREIF(NT$48b)
(US$1.7b)
Tier 2
TREIF(NT$67.0b)
(US$2.2b)
(US$2.3b) Government(NT$14b)(US$0.47b)
TREIF(NT$16b)(US$0.53b)
Reinsurance &/or Capital Market
(NT$20b)(US$0.67b)
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NT$3.0b(US$0.1b)
(US$0.67b)
Tier 1Co‐ins. Pool(NT$2.4b)(US$0.08b)
(US$1.9b)
Tier 1Co‐ins. Pool(NT$2.8b)(US$0.09b)
(NT$48b)
(US$1.6b)
Tier 1Co‐ins. Pool(NT$2b)
(US$0.07b)
Tier 1Co‐ins. Pool
(NT$3.0b)(US$0.1b)
TREIF(NT$17b)(US$0.57b)
Remark: US$ 1 = NT$ 30
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TREIF’s in‐house model (TREIF‐ERA) Enriching the autonomy of TREIF’s earthquake risk assessment
Risk Assessment Mechanism: TREIF-ERA Model
Enriching the autonomy of TREIF s earthquake risk assessment
Enhancing rationality and reliability of risk assessment results
Featured with precise analysis and parametric setting by usingthe most up‐to‐date raw data.
Facilitating research and development on‐‐ risk spreading mechanism & reinsurance program ‐ sum insured, rate, claim settlement criteria
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Model designer: National Center for Research on Earthquake Engineering (NCREE)
Model accomplished in June 2010
Periodically review and update on geo‐data and parameters setting
SystemsSystems RegulationsRegulationsGuidelines for Underwriting Guidelines for Underwriting
ProceduresProcedures
Claim Assessment Mechanism (1)
TELESTELES
Claim Evaluation System Claim Evaluation System (CES)(CES)
System System for Coordinating for Coordinating and Mobilizing Qualified and Mobilizing Qualified AdjustersAdjusters
GIS SystemGIS System
ggand Claim Settlementsand Claim Settlements
Guidelines for Management Guidelines for Management of Qualified Adjustersof Qualified Adjusters
Guidelines of Application and Guidelines of Application and Recovery of Loss Adjustment Recovery of Loss Adjustment ExpensesExpenses
SOP for Coordinating and Mobilizing Qualified Adjustors
SOP for Setting Up Joint Claim Service Centers
SOP for Claim SettlementOperating Operating Procedures Procedures for for ReinsuranceReinsurance
Operating Procedures ofOperating Procedures of
Criteria of Total Loss Criteria of Total Loss Assessment/ AdjustmentAssessment/ Adjustment
Public Public Inquiry Service Inquiry Service WebsiteWebsite
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Site assessment by Site assessment by Qualified AdjustersQualified Adjusters
ReRe‐‐assessment assessment by by engineers/architects engineers/architects (with report/meeting(with report/meeting))
A three‐phase loss assessment process
Centers Operating Procedures of Operating Procedures of ReRe--adjustment Mechanismadjustment Mechanism
WebsiteWebsite
Site appraisal Site appraisal by by engineers/architectsengineers/architects•• If insured rejects If insured rejects
the result; the result; oror•• Any specific case Any specific case
requiring rerequiring re‐‐assessmentassessment
If If rere‐‐assessmentassessmentrequires site requires site appraisalappraisal
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Claim Assessment Mechanism (2)
Taiwan Earthquake Loss Estimation System (TELES)
Setting Criteria for Loss Assessment Setting Criteria for Loss Assessment
Claim Assessment SOPsSOPs reviewed/revised by referring to Japan and New Zealand loss experiences
Training for Qualified Loss Adjusters 1,761 people trained
All adjusters are required to attend re‐training programs periodically
Annual Claim Simulation Drills‐conducted to meet the demands in a catastrophic earthquake
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To test the emergency response, claim mobilization and proficiency in claim SOPs
To enhance qualified adjusters’ claim assessment skills
To provide complete claim services by involving Non‐life & Life Insurance Associations
Claim Assessment Mechanism (3)
An integrated & coordinated claim mechanism among:
TREIF TREIF
Government Authorities TREIF to station at the government emergency operation center once set up TREIF to collect building damage data (from government authorities) To assist TREIF setting up “Joint Claim Service Centers” in disaster areas
Non‐life Insurance Association & Co‐insurers: To work with TREIF in respect of:
Convening Claims Committee Mobilizing adjusters and personnel for Joint Claim Service Centers
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g j p Discussing special measures of loss assessment
Engineers/Architects: In respect of loss re‐assessment/site appraisal of damaged buildings
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TREIF Emergency Response Mechanism
Simulated Scenarios
Response ActionsEQ Intensity 5 (or above) ORany EQ causing tsunami
EQ Intensity 5 (or above) ORany EQ causing tsunami
Manpower shortage/ Personnel affected by EQ
To be supplemented / backed up by pre‐sourced personnel (e.g. NCREE, the affiliated organizations or, volunteer groups…etc.)
Power/ telecom/ internet interruption
Sourcing emergency generators
Utilizing satellite phones
Activating Remote Access System
Response actionsto be taken based onsimulated scenarios
Response actionsto be taken based onsimulated scenarios
TREIF claim personnel to station at office
TREIF claim personnel to station at office
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Damage to TREIF office building
Moving to (pre‐sourced) temporary office
Server Crash Activating Remote Backup System Steps to be takenaccording to
Claim Settlements SOP
Steps to be takenaccording to
Claim Settlements SOP
Notice to competentauthority & insurersNotice to competentauthority & insurers
*EQ: Abbreviation for Earthquake
Promotion and Training Activities(as of December 31, 2013)
P ti A ti itiNo. of
Cl i T i iNo. of No. of
Promotion ActivitiesSessions
Workshops
General public 119
Banks & insurers
65
Schools 122
Fair activities 37
Mass media advertising 96
Claim Trainings Sessions Participants
Training for Qualified Adjuster 30 1,761
Re‐training for Qualified Adjuster
34 1,771
Training for Personnel at Joint Claim Service Centers
6 315
i i f l
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Mass media advertising 96
E‐learning & Promotion Platform http://elearning.treif.org.tw
Launched in Jan. 2014
Re‐training for Personnel at Joint Claim Service Centers
2 99
Professional Technician Workshops
13 926
Total 85 4,872
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Take‐up Rate: 30.75% (out of 8,372,927 households)
Business and Finance Overview (as of March 31, 2014)
Number of Policies in force: 2,574,995
Cumulative Liability: NTD4.2 trillion (US$140 billion)
Accumulated Reserves: NT$18.1 billion (US$603 million)
Net worth: NT$1.24 billion (US$41 million)
Claim payout: 7 Cases with loss paid totaling NT$6.22 million (US$207,000)
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Major Construction Profile
Reinforced Concrete (RC): 90.5%
Steel Reinforced Concrete (SRC): 1.6%
Reinforced Brick: 7.3%
Future Prospects: NAT CAT Risk Management in Taiwan
• To call for general public’s attention on:
• Earthquake risks
• Disaster prevention & emergency evacuation informationStrengthening public awareness on NAT CAT risks
• TREIF basic cover
• Sum Insured
• Claim criteria
• Scheme limit/structure
Ongoing improvement on the TREIF statutory scheme
• Commercial “extended” & “excess” cover assupplementary to the statutory TREIF basic cover
Encouraging innovative NAT CAT commercial insurance
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• Exploring new sale channels
• Studying the feasibility of making the cover compulsoryIncreasing policy take‐up on the TREIF statutory cover
• Experiences shared by New Zealand, Japan & other countries
• Info. exchanged with other national CAT insurance schemes
Enhancing information sharing and cooperation with other national catastrophe insurance schemes
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Thank you Thank you for attentionfor attention!!
25www.treif.org.tw
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