Page 25 - Insurance Times August 2019

Even Hours Clauses are corrected as in the case of Thai Y Data to Insurers and Reinsurers out of past recorded
Floods losses. The 188 consecutive hours of 7 days was also data especially of earthquakes and hurricanes with
replaced by 504 consecutive hours of 21 days as One Event revaluation of Loss Amounts.
of flood loss.
Y It may be practically difficult to implement but
guidelines are created for Rating Norms for covering
Yet, despite all corrective measures with increasing Earthquake Risks and Hurricane Risks in particular also
frequencies and severities of Nat-Cat Events of losses, including Storms, Floods etc.
reinsurers prefer to cover Nat-Cat Loss Events of AOG Perils
Y Seismological maps of various countries are created
by the creation of Market NAT CAT Pools.
which are helpful to insurers of these countries to
assess and control exposure but the aggregate
Now, let us understand how to underwrite AOG Perils Risks
by CRESTA Zonal Assessments and Cat Models. exposures keep on changing due to Climatic Changes,
Demographic Changes and Urbanization Patterns. For
example, Japan's earthquake exposures are done with
CRESTA- Catastrophe Risk Evaluationand Standardizing
Target Accumulations-was the creation of a ioint project by about eleven zones and possible accumulation between
aggregates of zone 4 & 5 or Zone 5 & 6.
global reinsurers Swiss Re, Munich Re and Gerling- Konzern
in the decade of 1970's.
Global Reinsurers and domestic Insurers of various countries
worldwide have been using the CRESTA made data as
The aim of CRESTA has been to establish a globally uniform
Underwriting Risks with controls and proper levels of Rating
system to control accumulations of risks arising out of NAT-
Risks.
CAT Events especially AOG Perils of Earthquakes, Various
kinds of Storms and Floods.
Still there always have been compromises between IDEAL
Rating Levels and REAL Rating Levels.
CRESTA member countries Maps of Zonal Aggregates of
Natural Hazards region-wise has been accepted by Insurers
However, in Risk Management Technologies of writing and
and Reinsurers globally. 'CRESTA ZONES' have been of
underwriting Acts of God Perils of Natural Catastrophes, a
Universal Standard internationally famous among all players closer co-operation is always ideal to be followed among
of Insurance and Reinsurance Industries.
Insurance Underwriters, Reinsurance Underwriters and
Reinsurance Brokers.
CRESTA:
Y Determine country-wise specific zones for assessment Hurricane Betsy (1965), Hurricane Camile (1969), Hurricane
of accumulations of risks in the events of Natural Hugo (1989), Hurricane Andrew (1992), Hurricane Georges
Catastrophes according to geological exposures to (1998), Hurricane Floyd (1999) and then in 21st century
specific natural hazards in a country. Hurricanes Katrina (2005), Rita (2005) and Wilma (2005)
Y Drawing up Zonal Accumulation to assess aggregate revealed increasing frequencies and severities of NAT-CAT
exposures. Events arising out of AOG Perils. In 2008 Hurricane Ike, in
2011 Thai Floods, in 2011 Japanese Tsunamis caused by
Y Electronic Transmission of NAT-CAT Accumulation Data.
Tohoku earthquake and a series of Floods in India since
2010-11 to 2018 have all revealed practical TRUTH that all
attempts to generalize norms of CAT Modelling and
understanding the underwriting principles behind insuring
and reinsuring AOG Perils have been a practical challenge
to underwriting expertise with enriching experience of
actual events.

The 'TRUTH' is Cat- Modelling can become useful only as
guidelines based on past experience. They are probabilistic
assumptions to understand and underwrite ever increasing
exposures. Exposure and experience both remain alluring
in spite of all attempts of Cat Modelling.
The Insurance Times, August 2019 25