Looking back at an extraordinary natcat year 2011
"Firstly, the frequency of catastrophic events was 'extreme'," says Amer Ahmed, CEO of Allianz Re. “New Zealand alone had three events. The Japan earthquake and tsunami was a human and societal tragedy. Having a large earthquake in Japan in itself was not a big surprise but the effects of the tsunami were more devastating than foreseen. Nevertheless, this event did not throw the market too far off course,” says Ahmed.
Another feature of last year – and one that it still rippling through the market – was the losses that came from secondary perils or so-called cold spots such as the Thailand flooding, which raised concerns on a number of different levels.
“We know that Thailand is prone to flooding but the severity was much greater than envisaged. Second, it became clear how human interaction imposed upon the flow of water can lead to unexpected consequences. Third, and perhaps most important, Thailand showed the impacts of globalization and concentration into industrial parks such as those in Bangkok which led to an immense accumulation of insured values in the area,” explains Ahmed.
How are reinsurers responding to 2011
The big question raised at last year’s Monte Carlo Rendez-vous and Baden-Baden meeting was how could and should the market respond to this remarkable and challenging string of losses, particularly in the field of business interruption and contingent business interruption. Insurance and reinsurance buyers feared a sudden loss of capacity as has occurred in the past in more standard cat lines after big events.
“First, we all need better information about the risk exposures. For property insurance this should be relatively straightforward: insurers should know where buildings are located so that a comprehensive picture can be built,” says Ahmed.
“Second, we need to look at the elements that move such as stock and goods in transit. This is more difficult to judge and with business interruption this moves on a level further in complexity. One can judge the potential damage to property relatively easily but it is much more difficult to model the consequences on business operations and getting them up and running again. Therefore improved transparency on the underlying exposures and risk is the top priority,” he explains.
