NATURAL PERILS - PREPARATION OR RECOVERY WHICH IS HARDER? Northern Territory Insurance Conference Jim Filer Senior Risk Engineer Date : 28 October 2016 Version No. 1.0
Contents Introduction Natural Perils How Big is the Issue? Munich Re Natural Peril Maps of Australia Global Natural Peril Event Trends Understanding the Exposure Questions Summary What We Currently Do and Deliver with Our Insureds The Recovery Process The Preparation Process
Australian Exposures Major Australian Natural Perils Losses Over the Last 45 Years Event Insurance costs AUD$M (expressed in 2011 figures) Bushfire 4,830 Cyclone 7,727 Earthquake 3,240 Flood and Storms 9,280 Hailstorm 14,332 Tornado 202 Source: AXCO 2016 Insurance Market Report Natural Hazards: Non-Life (P&C), Munich Re NatCat Service 2015 Not fully covered by insurance People / Business need to find additional moneys to recover fully The economy takes a hit Source: AIR Worldwide 2015 Global Modelled Catastrophic Losses, September 2015, p9 3
Loss Histories Major Events Global Catastrophes 2015 Events Number of Incidents Insured Loss (USD $M) Storms 102 20,624 Floods 55 4,306 Drought, Bushfires, Heat Waves 23 2,043 Earthquakes 13 510 Hail 3 306 Man-made Disasters 155 8,983 Total Natural Catastrophes 198 27,789 All Catastrophes 353 36,772 4 (1) Based on events classified by Swiss Re as a catastrophe. The threshold is $19.7 million in insured losses for maritime disasters, $39.3 million for aviation disasters and $48.8 million for other losses or $97.7 million in total economic losses;; or at least 20 dead or missing, 50 injured or 2,000 made homeless. Source: Swiss Re, Sigma,1/2016.
Loss Histories Major Events 5
Munich Re Peril Maps of Australia Cyclone Windstorm Bushfire 6
Munich Re Peril Maps of Australia Earthquake Hail Lightning 7
Global Natural Peril Event Trends Relative (reference year 1980) trends of numbers of loss relevant natural events for the four different groups of perils. Lines represent the linear regressions of the individual curves. Trends are significant for all peril families. The cost of natural disasters in Australia is 50% more than previously estimated $9bn in 2015 and is set to increase to $33bn by 2050 even ignoring the effect of climate change, according to two reports commissioned by the Australian Business Roundtable for Disaster Resilience and Safer Communities. Source: Peter Hoeppe Trends in weather related disasters Consequences for insurers and society Weather and Climate Extremes, Volume 11, 2016, 70 79 http://dx.doi.org/10.1016/j.wace.2015.10.002 8
Understanding the Exposure Defining the event - Insurance Categorisation Vs Australian Standards Vs Common Terminology Categorisation. National Construction Code (NCC) response e.g. AS1170.2. Insurance information: Ø Munich Re Ø Swiss Re Local authority information e.g. flood levels and bushfire exposure. What can we do, what can the insured do? 9
Understanding the Exposure Defining the event Flood Definitions: Riverine flooding occurs when a watercourse overflows its banks; Overland flooding occurs when water flows over the surface of the land on its way to a watercourse; Coastal flooding is caused by storm surge and wind driven waves but can be exacerbated by runoff; and Flash flooding can be any of the above forms of flooding but is defined as flooding occurring within about six hours of rain (BOM 2006). 10
Information is Key 11
Information is Key 1% AEP Wind Driven Events Darwin Munich Re, Cyclone Zone 1-39m/s to 51 m/s Swiss Re 40m/s to 50m/s AS/NZS 1170.2 Region C - 56m/s Sydney Munich Re, Windstorm 3-45m/s to 56m/s Swiss Re 25m/s to 30m/s AS/NZS 1170.2 Region A2-41m/s Which source do you use to appropriately define response measures? 12
This Convention Centre s Exposures Do you all feel safe here? Peril Munich Re Swiss Re Other Source Cyclone Zone 1 39m/s 51m/s Significant 40-50m/s AS1170.2 Region C 56m/s Tsunami Medium to High Outside (meaning little to no exposure) Storm Surge Zone 2 Medium to High Coast Flood Very High 0.1% AEP Storm Surge event Tornado Zone 2 (of 4) No observation Hail Zone 2 (of 6) Very Low (<0.1 Days of >2cm hail per 2500km2 per year) Lightning Earthquake Flood Zone 4 (of 6) - 10-20 ground strikes per km2 per year Zone 1 Modified Mercalli Scale VI / Richter Scale 5-6 16-20 Strikes per km2 per year Moderate (0.18-0.27g) / Richter Scale 4-5 1 in 2,000 year flood event (0.05% AEP) 13
NATURAL PERILS THE PREPARATION PROCESS
The Preparation Process Benefits of Preparation Understanding of the business vulnerabilities to improve resilience. Reduction / elimination of potential impact of small scale events. Reduction of impact of larger catastrophic type event impacts. Reduced time to return to Business as Normal. Ability to prepare the site for event, allowing quicker recovery to occur due to safe work space provisions. Ability to support staff if required. Ability to support local businesses recover. Ability to plan funding / staffing allocations (if required). Issues with Preparation Processes Awareness of event outcomes / damage potential with respect to business activities. Lack of awareness / perceptions on low-probability events. Awareness does not necessarily lead to appropriate preparation Ø Lack of understanding on what s required to prepare Ø Lack of funding Ø Lack of time Identification of trusted advisors to help with the process. 15
NATURAL PERILS THE RECOVERY PROCESS
The Recovery Only Process Benefits of Recovery Only Response No up front costs. Damage extent is evident. Issues with Recovery Only Response Speed / money are considered key in recovery. Costs / available funds. Insurance policy coverage may not be understood / under insured. Availability of people and equipment. Customer & supplier s understanding of delays. Staff personal exposure to event. Presence of toxic materials (e.g. asbestos). Unwanted presence of wildlife e.g. crocodiles. Unsafe environment e.g. electrical / gas supply, flammable / combustible materials. 17
What We Currently Do and Deliver with Our Insureds Communication Information provision to insured to support the understanding of exposures. Information and training to implement plans and mitigation measures. Communication on maintenance measures required to ensure mitigation measures function as intended. Support Working with local authorities to understand exposures and existing physical mitigation measures. Additional support to develop plans. Support in identifying suitable practical mitigation measures relative to the peril exposures identified. 18
Summary - The Way Forward The 6 P s: Proper Preparation and Planning Prevent Poor Performance. Preparation for these events is lower than expected, however with greater knowledge and awareness of the quantum of the hazards, people and businesses will have a better understanding of the risks and their vulnerabilities. This will enable them to prepare for the unknown and help reduce the expected outcome costs in terms of money and labour time to recover, in turn freeing up these resources to help the communities return to normality quicker. This will help us support our customers in making their community a safe place. 19
Summary - The Way Forward IAG has a number of drivers designed to make communities safer, stronger and more confident, uphold IAG s vision and shared value approach, in particular:- 1. Resilience to natural perils. Natural disasters cannot be avoided, but their impact can be mitigated and/ or minimised. 2. Business Resilience. Organisational resilience typically refers to a business s ability to adapt and evolve, to respond to short-term shock and to shape itself to long-term challenges. 3. Access & affordability solutions. Feeling protected gives certainty and builds confidence. From this, people, companies and communities have a strong platform from which to thrive. 20
Questions Thank you for listening QUESTIONS? 21
Contacts James Frankenfeld, State Manager SA/NT Phone: 08 8425 6595 Email: james.frankenfeld@cgu.com.au Jim Filer, Senior Risk Engineer, Risk Partners Phone: 07 3337 8617 Email: jim.filer@cgu.com.au 22
References References a. Munich Re - Trends in weather related disasters Consequences for insurers and society, Peter Hoeppe, Weather and Climate Extremes, Volume 11, 2016, 70-79 b. Munich Re Topics Geo 2015, p57-58 c. Munich Re Topics Magazine 2/2013, p16, p20 d. Munich Re NATHAN Tool e. Swiss Re Sigma 1/2016, p4 f. Swiss Re Sigma 5/2016 g. Swiss Re - The Australian Commercial Insurance Market, October 2016, p4, p19-20 h. BOM - Australian Tropical Cyclone Outlook for 2016 to 2017, 10 October 2016 i. AXCO 2016 Insurance Market Report Natural Hazards: Non-Life (P&C) j. Insurance Information Institute Catastrophes: Global, World, Natural Catastrophes (Accessed 2016) (http://www.iii.org/fact-statistic/catastrophes-global) k. AIR Worldwide 2015 Global Modelled Catastrophic Losses, September 2015, p9 l. AON 2015 Annual Global Climate and Catastrophic Report m. EM Data (http://www.emdat.be/country_profile/index.html) n. Insurance Council of Australia - Catastrophe events 23
YouTube videos 24 Cyclone https://www.youtube.com/watch?v=vn4beli7sro Cyclone Marcia QLD 2015 https://www.youtube.com/watch?v=hrr-a6o0ye8 Storm Surge https://www.youtube.com/watch?v=xtvkrlesrwu Flood River Torrens https://www.youtube.com/watch?v=vnnmrccdqre Flood - Brisbane River https://www.youtube.com/watch?v=zkpcqb9ogs4 Lightning Darwin 2010 https://www.youtube.com/watch?v=jm3rhonor9o Lightning - Adelaide https://www.youtube.com/watch?v=_w4mgbclmju Lightning Strikes Australia https://www.youtube.com/watch?v=bj82vmqqu8i Hailstorm Brisbane https://www.youtube.com/watch?v=rzl4c4lcxma Tornado and storms in Sydney https://www.youtube.com/watch?v=-zjf4wpqp-s