Tsunami Insured Loss Info Vague In Wake Of Killer Waves

[cb88]

Insured Loss Info Vague In Wake Of Killer Waves

By Mark E. Ruquet

NU Online News Service, Dec. 29, 4:03 p.m. EST—Information coming out of the Pacific Rim is sporadic as brokers are finding it difficult to communicate with policyholders in the wake of the killer tsunami that has claimed more than 77,000 lives and counting.

“The human toll is much greater than anything people have ever considered,” said Brian Ehrhart, president of Aon Re Services, a subsidiary of Chicago-based broker Aon, Inc. “There is a huge human impact here that is stunning and significant. The insurance impact will be relatively small compared to the human impact. It's too early to comment on what [the insurance impact] will actually be, because I don't think reports of specific property damage have come in.”

In a statement from Lloyd's of London, the insurance market said it is monitoring the developing situation in Asia and expected its exposure to be limited to resorts, personal accidents, travel insurance and marine risks.

Lloyd's said communication is limited and there is little information coming out of the affected areas, making it impossible for now to determine the extent of their exposure.

The Lloyd's statement went on to say that the market would make more information available as it comes in over the coming days and weeks.

What would most likely be affected by the catastrophe, on a global scale, would be large corporate-owned vacation properties, noted Mr. Ehrhart, largely affecting property and facultative insurance markets.

Any dollar figures mentioned in light of the calamity is purely speculative, he said, adding the it could be as long as six months before some of the worst-hit, less-developed countries can report loss figures.

The tsunami was caused by a magnitude 9.0 earthquake off the West coast of Sumatra in the Indian Ocean early Sunday morning.

Benfield ReMetrics, a subsidiary of London-based broker Benfield Group, issued a report on the disaster. In it, they said earthquake and/or tsunami coverage is not offered as a standard component of property insurance in the affected markets, which include Thailand, India, Indonesia, Malaysia, Sri Lanka and Maldives.

In Thailand, Benfield said it predicted that much of the expected losses would come from the resort areas of Phuket affecting beachfront hotels, with business interruption to be a major contributor toward claims. The firm also noted that the Thai insurance market has never experienced a catastrophic event of this magnitude.

The Insurance Information Institute put out a report, citing figures supplied by Swiss Re's Sigma division. Total non-life premium volume in 2003 for India, Indonesia, Malaysia and Thailand came to $9.3 billion, with most of it--$3.7 billion--from India and $1.7 billion relating to Thailand. The primary risk bearers are largely domestic and some Japanese insurers.

Mr. Ehrhart said there will probably be many insurance adjusting issues coming out of this event that have never been considered in these regions before, such as replacement costs, complete loss and re-building.

“Will they be allowed to re-build in these areas? Will it be considered safe or will they have to recede into the hillside?” Mr. Ehrhart speculated. “There are a lot of issues out there. We just don't know.”


Since risk management and catastrophe response is cb88's field, lay your questions on me.


cb88 is currently pursuing her Masters in Emergency & Disaster Management and has worked in the insurance/risk management industry in sophisticated coverages for about 20 years

[cb88]

West Coast Tsunami Could Cost Trillions

By Michael Ha



NU Online News Service, Dec. 29, 1:21 p.m. EST—As the casualty count continues to grow from Asia's deadly tsunami, experts said the U.S. West Coast is vulnerable to such a catastrophe and the insurance costs could run into the trillions.



"The coast of California, Oregon, Washington, and also Alaska and Hawaii—they are all vulnerable to tsunamis," said Carolyn Bell, spokesperson for the Reston, Va.-based U.S. Geological Survey, the sole science agency for the U.S. Department of the Interior.



According to Ms. Bell, an earthquake that occurs in the Pacific could create giant tidal waves reaching the U.S. West Coastal region. "Scientifically there is a possibility. It's probably fair to say there may be around 5 percent chance in the next 30 or 40 years," she told NU.



Such an event in the U.S. could mean "trillions of dollars" in property exposure in the worst-case scenario, according to the Insurance Information Network of California in Los Angeles.



"It would have to be in the trillions of dollars because you have to look at all the potential policies you could be factoring in: earthquake insurance, flood insurance, homeowners, commercial, auto, medical, life," said the group's spokesperson Candy Miller.



"Beyond homeowners, you have to look at what the impact would be on business, tourism, the closing and interruption of business, workers' compensation, and some of the priciest real estates in the world."



Meanwhile, Fitch Ratings in New York predicted that the insured losses from deadly Asian tsunamis will mostly affect the Asian primary insurance market and the worldwide reinsurance market, including markets in Singapore, London and Bermuda.



The rating agency noted U.S. primary insurers are not likely to incur material losses as the result of this event. Some U.S. primary insurers may have "modest exposure," however, on property owned by multi-national companies insured through policies issued by U.S. carriers.



Fitch also forecast that the event occurred too late to affect Jan. 1 reinsurance renewal pricing. Nonetheless, the pricing of retrocessional reinsurance—reinsurance purchased by reinsurers— could be affected since many retrocessional policies renew on March 1.

[cb88]

Swiss Re Issues Tsunamis Claim Estimate

NU Online News Service, Dec. 30, 3:47 p.m. EST—Swiss Re said it estimates its claims related to the recent calamity from the tsunamis in the Indian Ocean region to be below CHF 100 million (Swiss Franc or $88.01 million U.S.)

The Zurich, Switzerland-based insurer went on to say that the sheer size of the event and the absence of historical data available make it difficult to provide an exact estimation of the damage, particularly as information from the affected areas is still scarce. However, the claims cost for the insurance industry will be in sharp contrast to the human and economic losses triggered by this event as the insurance penetration in the coastal areas of the affected countries and the concentration of value is comparatively low.

Most of the insured losses, the company said, are likely to concern property damage and business interruption.

The Dec. 26 disaster occurred after an earthquake with a magnitude of 9.0 on the Richter scale, the strongest in 40 years, North of Indonesia, triggered tsunamis which caused widespread death and massive damage to coastal areas around the Indian Ocean. The countries the most affected are Indonesia, India, Sri Lanka, Thailand, Malaysia and the Maldives. Estimates now put the death toll at more than 114,000 and climbing