Page 24 - Insurance Times August 2019

RISK MANAGEMENT

OF AOG PERILS:

RISKS THROUGH

'CRESTA' AND 'CAT

MODELS' BY ALL RISK

CARRIERS

Acts of God Perils: SEISMIC and WEATHER Perils are Y Loss corridor or loss participation clause.
usually made INSURABLE through REINSURABILITY as Nat-
Y Commission of 20% or so on premiums of AOG Perils
Cat Events involve enormous accumulations of Liabilities in covered.
Natural Catastrophe Prone Zones in various countries of the
world. Y NIL P.C. on AOG Perils Profits.
Y Capped Event Limits with Any One Event and/or Annual
Global Reinsurers bear almost 90% of Total Nat-Cat Insured Aggregates in Proportional Treaties with full premiums
losses through their participation in all kinds of given to Reinsurers and Insurers bearing spill overs
Reinsurances. without premiums.

Y Estimated premium income may actually decline and
Reinsurers have become more 'Restrictive' and 'Prohibitive' in Reinsurers introduce 90% of EPI as MinDep Premiums.
covering Nat-Cat Risks by Proportional Reinsurance Treaties.
Pricing of premiums on Proportional Treaties depends on Direct
Insurers Rating and EPI is not quoted by Reinsurers who impose Reinsurer prefer XL Treaties where they Quote XL Treaty
restrictions by various types of measures as under on Premiums by Rate on Line % method applied on limits of
each layer of multi-layered Cat XL Treaty Programs with Min
Proportional Treaties Reinsured Insurers:-
& Deposit Premiums @90% of XL Premiums. However,
About the author Reinsurers follow certain norms to have overall pay-back
period 10 years by 10% R.O.L. Rate On Line XL Premium is
K. L. Naik converted into Adjusted Rate % on EGNPI.
Director Naik Consultancy &
Advisors L.L.P Again with each reinstatement of limits exhausted by Cat
Mumbai Event Losses, there is 100% Additional Reinstatement
Premium.

24 The Insurance Times, August 2019