The German NatCat-Insurance

Transcription

1 The German NatCat-Insurance Flood Insurance Programs Trials, Tribulations and Success Stories Dr. Bernhard Gause NICC Friday, October 2, Agenda A glimpse of the past The geographical information system ZÜRS Geo Structure and functionality of the German NatCat-Insurance Flood 2013: The system put to the test Lawmakers decision in 2015 Rising risk awareness: Campaigns and Information-Portal 1

2 3 A glimpse of the past East Germany State run monopoly insurer, fixed premiums Socialized losses Widespread NatCat-Insurance (buildings, inventory) Prevention measures practically irrelevant West Germany Coexistence of fire-monopoly-insurers (statutory public bodies) and private insurance industry Calculations as well as Terms and Conditions strictly supervised - but risk based Supervisor reluctant on nationwide NatCat-Insurance beside the perils Windstorm and Hailstorm Fear of negative selection, esp. Flood Exception: Federal state of Baden-Württemberg Mandatory NatCat-Insurance due to earthquake and other local perils Preventions measures: Individual (small scale at private property) as well as governmental responsibility (dikes, retention areas etc.) 4 A glimpse of the past German reunification 1990 Given the millions of East German NatCat-policies, fear of negative selection was no longer tenable Supervisor allowed nationwide NatCat-Insurance in 1991 July 1994 Deregulation of the European insurance market End of all monopolies, including the mandatory Baden-Württemberg NatCat-Insurance Statutory public bodies were transformed into private insurance companies Insurance industry gained experience in covering NatCat-perils besides windstorm and hailstorm Risk assessment and calculation difficult due to lack of readily available and easy to access data The idea of an information system gained momentum Dawn of ZÜRS Geo 2

3 5 The geographical information system ZÜRS Geo ZÜRS: (Z)onierungssystem für (Ü)berschwemmung, (R)ückstau und (S)tarkregen [zoning system for floods, backwater and torrential rain] 1999: development started within the German Insurance Association 2001: offline system available (on CD later DVD) 2008: online system started, rapid development of new functions, data layers ZÜRS Geo provides an online risk assessment tool for the insurance industry which helps it to assess flood risk and offer a risk-related premium. At the heart of the ZÜRS Geo system is a geo-database which uses address information (road network, house number data etc.) to show the risk of flooding for any requested area. * Web Map Service ** Web Feature Service 6 The geographical information system ZÜRS Geo Flood zones GK 4, high threat: Statistically, flood at least once every 10 years GK 3, medium threat: Statistically, flood at least once every years GK 2, low threat: Statistically, flood at least once every years GK 1, very low threat: Statistically, flood less frequent than once every 200 years 3

4 Premium The geographical information system ZÜRS Geo The initial development of ZÜRS was financed by the members of GDV by sharing of costs depending solely on the market share of the insurance company Since 2008 (with the introduction of the online-platform), ZÜRS Geo is distributed among the insurers through a year by year licensing model Fixed minimum fee for very small insurers ( 5.000,- p.a.) Variable p.a. fee (depending on the market share) for larger companies Public water boards have free access (confidence-building measure, no closed job by insurance industry) Initial costs: approx ,- (modelling of flood zones, programming, licensing of geodata like maps or digital elevation model etc.) Operating costs per year: approx ,- (server hardware, support, testing, running licenses, labor costs etc.) 8 Structure and functionality of the German NatCat-Insurance Government At present, not involved* Supply Private Insurance industry Claims adjustment Demand Legal Framework inter alia Supervisory act German Insurance Contract act Product Information act European and national law on data protection Policyholder *Not involved in any kind of risk transfer mechanism, but partner in the NatCat campaigns 4

5 9 Structure and functionality of the German NatCat-Insurance Insurance is voluntary. The scope covers practically all inhabited areas; however, due to the general public s lack of awareness of risk, demand is modest, but steadily rising Approx. 40% market penetration in 2015, uneven distributed (high: federal states with former insurance monopoly; low: other areas) There are no standard premium rates or deductibles; insurers must calculate them using statistical data and management ratios. Risk based pricing. Because each risk has to be assessed on a case-by-case basis using statistical data, the zoning system ZÜRS Geo has become an important element of catastrophe insurance in Germany. NatCat-Insurance premiums in Germany Examples only insurance market is deregulated since 1994 Private Building Insurance (single family house, 150 m 2 ) 180,- to 220,- Euro p.a. (Fire, Escape of Water, Storm/Hail; no deductible) 60,- to 290,- Euro p.a. (NatCat; 1.000,- Euro deductible) Private Content Insurance (apartment, 100 m 2 ) 140,- to 180,- Euro p.a. (Fire, Escape of Water, Storm/Hail, Burglary; no deductible) 50,- to 150,- Euro p.a. (NatCat; 1.000,- Euro deductible) Commercial Property Insurance (metal works, year of construction 1975, 1 Mio. Euro new constr. value) 900,- to 1.200,- Euro p.a. (Fire, Escape of Water, Storm/Hail; no deductible) 200,- to 500,- Euro p.a. (NatCat; deductibles: 2.500,- Euro flood / earthquake, all other natcat-perils 500,- Euro) 1 EUR ~ 1,4 CAD 1 CAD ~ 0,7 EUR 1 EUR ~ 1,1 USD 1 USD ~ 0,9 EUR 10 As of July

6 11 Flood 2013: The system put to the test Coalition Agreement 18th election period (agreed on 5 month after the 2013 flooding) Paragraph Civil Protection Due to climate change and the potential for more losses, we will look into the introduction of a mandatory NatCat insurance scheme. Paragraph Flood Protection The framework conditions for the NatCat insurance have to be reviewed. Conference of the Ministers of Justice (JuMiKo) in 2014: Mandatory NatCat insurance scheme discussed as an option Above all in-depth discussion about risk based pricing, affordable pricing, prevention, exclusions, exposed risks, no-claim-bonus-systems, sum insured 12 Lawmakers decision in 2015 (excerpt) Resolution of the conference of the Ministers of Justice (JuMiKo) - June 18 th, 2015 The Ministers of Justice adopt the report of the Working Group "insurance for natural hazards. With respect to the idea of a mandatory insurance scheme the report states significant legal and actual objections. The same applies to all alternative legal solutions; they are inappropriate for significantly increasing the take-up of natcat-insurance or encounter legal concerns too. Finally all approaches to solving the problem require a financial contribution by the government in order to avoid social hardship. strongly welcome the proposals of the 83rd Conference of the Environment Ministers to boost the take-up of natcat-insurance by conducting a nationwide natcat-awareness-campaign and developing a natcat-informationportal. Furthermore federal states and the German government should proceed with the steps taken to avoid flood damage by expanding flood prevention measures and sustainable land use planning. agree that protection against natural hazard includes individual prevention measures as well as the transfer of financial risk. Future subsidies [in case of natcat-events] should therefore depend on whether the homeowner could have taken-up natcat-insurance on commercially reasonable conditions. This concluded the task started by the Coalition Agreement of the 18th election period 6

7 13 Reasons Insurance Industry managed to regulate damages amounting to 1,8 billion EUR after the 2013 flooding; Insurance Industry won praise even from consumer organisations State aids amounting only to a couple of millions EUR: why change the whole system if we only need to bring people to take out insurance? Mandatory insurance is more a tax than insurance Current Initiative in the market to make NatCat-Insurance available for every building (with deductibles) 14 Rising risk awareness: Campaigns and Information-Portal NatCat campaigns in several federal states The insurance industry and several federal states are already running NatCat campaigns Insurers committed in developing insurance solutions for the highly exposed risks Government is (usually) holding back subsidies, if the risk was insurable, but the home owner decided not to buy cover 7

8 15 Rising risk awareness: Campaigns and Information-Portal Public Risk Information and awareness building: Compass of Natural Hazards Proof of concept for nationwide portal makes people aware of NatCat perils without any scientific or governmental mumbo-jumbo (no return periods or design flood parameters ) Easy to use, easy to understand - same look and feel in all federal states of Germany Analogue risk information with sliders from to severe Wilhelmstraße 43 / 43 G, D Berlin Postfach , D Berlin Tel.: Fax: , rue Montoyer B Brüssel Tel.: Fax: