Linking Disaster Damage Assessment Systems with Insurance of Public Assets. (Indemnity based coverage v. parametric based coverage)

Transcription

1 Linking Disaster Damage Assessment Systems with Insurance of Public Assets (Indemnity based coverage v. parametric based coverage)

2 Mexico: assessment of current financial strategy against natural Disasters Feasibility study of risk pooling of Mexican states against natural Disasters The current financial strategy is a mixture of retention (budget), insurance per sector, reinsurance and a Multi-Cat bond. All the above based in a strong handling of information and technical analysis. FONDEN s Rules and Guidelines are in the core of the scheme 2

3 Costa Rica: Catastrophe Risk Transfer Vehicle (Public Assets) Insurance Supervisor Trust (administrat ion & technical issues) Trust Board Reinsurance GoCR Guarantee Reserves/Capital The best option is a mixture of some RM techniques: retention for the more frequent events, a Cat DDO (warranted by the GoCR) and risk transfer to the international reinsurance market. The discipline of the market will support the appropriate and timing payment of claims. This is attained by the terms and conditions of the insurance policies and the extensive use of professional loss adjustors. Trustor: Insurance companies Beneficiaries 3

4 Colombia CAT-SWAP In this hypothetical case, the payment is due once the parameter of the exhaustion point (priority/retention) has been exceeded. This mean a fast payment but there is the existence of the basis risk, i.e. that the trigger does no perfectly match the losses actually incurred. 4

5 Central America: Options for risk transfer (second generation parametric insurance CCRIF style) 1 CA countries each independently transfer catastrophe risk to reinsurance/capital markets Reduction of insurance premium 0% 2 CA countries jointly transfer catastrophe risk to the reinsurance/capital markets, without joint reserves 3 CA countries jointly transfer catastrophe risk to the reinsurance/capital markets, without joint reserves 4 CA countries work with CCRIF to jointly transfer catastrophe risk to the reinsurance/capital markets CA countries work with Mexico s National Disaster 5 Fund, to jointly transfer cat risk to the market 27% 41% 44-45% 47-51% 5

6 Indemnity Insurance of Public assets Terms and Conditions rules how the loss assessment will be done, for example, using specialized loss adjustors. The wording of the insurance policy should be free of ambiguities: the limits, sub-limits, exclusions, how the deductible and co-insurance, for each coverage, will be applied need to be defined with precision. The insurance policy should be efficient in terms of cost and coverage, e.g. full insurable amount v. first loss approach.

7 Some common findings and solutions Information available on both the insurance coverage and on the characteristics of buildings was incomplete and, at times, inaccurate. Additionally, the quality of the insurance policies is highly variable, for example: in some cases policies are only purchased for short periods of time, leading to gaps in coverage. In other cases, for similar risks, the terms and conditions was very different. Identification of technical and legal options for the improvement of insurance coverage of central government buildings, including a centralized, standardized approach to insurance purchase; Establishment of a database for insurance policies and public assets. Establishment of standard requirements for insurance contracts and minimum standards for firms participating in insurance contracts (e.g., local insurers, insurance brokers, reinsurers, etc.); Implementation, based on the findings of the analyses, of an improved approach

8 Colombia: Insurance of public assets buildings Diagnostic phase revealed: Underinsurance of assets; Incomplete and imprecise information on insurance policies and buildings. MoF and new Public Procurement Agency (CCE) collaborating to design and to implement centralized approach (first-loss insurance). Standard, market-based terms and conditions for property insurance; Likely premium reductions; Reduction of financial, technical, and credit risk to the government. CCE Insurance broker Insurance Insurers

9 Insurance of public assets concessions GoC will invest US$22.5 billion in infrastructure concessions from July 2012 request for guidelines for insurance coverage and participants based on int l (re)insurance market standards. Guidelines for insurance coverage before, during, and after construction of infrastructure Reduce financial, technical, and credit risk National Infrastructure Agency (ANI) is incorporating standards into master contracting document MoF will review to ensure inclusion

10 Two final remarks: Despite that the insurance of public assets is compulsory in some countries, for a variety of reasons, there is a room to improve both its quality and cost. A Public Private Partnership seems to be a efficient approach to solve the situation. Thank you!