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CRESTA Earthquake Zones ICLR Hazards Earthquake Zones

CRESTA Earthquake Zones ICLR Hazards Earthquake Zones. OSFI Default Loss Estimates . Keith Fillmore Senior Vice President Aon Re Canada. September, 2004. Outline. CRESTA What is CRESTA Who is CRESTA Why CRESTA Brief History of CRESTA Canadian CRESTA Zones

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CRESTA Earthquake Zones ICLR Hazards Earthquake Zones

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  1. CRESTA Earthquake Zones ICLR Hazards Earthquake Zones OSFI Default Loss Estimates Keith Fillmore Senior Vice President Aon Re Canada September, 2004

  2. Outline • CRESTA • What is CRESTA • Who is CRESTA • Why CRESTA • Brief History of CRESTA • Canadian CRESTA Zones • Revision of CRESTA Earthquake Zones in 2003 • CRESTA MAPS • ICLR Hazard Zones • Reason For Development • HAZARD MAPS

  3. Outline • Default Loss Estimates ( DLE's) • What are DLE’s • Why DLE’s • Use of DLE’s • Revision of DLE’s 2004

  4. Who / What is CRESTA • From CRESTA . org “ CRESTA promotes the accurate and efficient assessment and control of liabilities arising from the insurance and reinsurance of natural perils” • CRESTA began in late 1970’s after “Tropical Cyclone Tracey” hit Darwin Australia • Group of insurers and reinsurers

  5. Who / What is CRESTA • There are CRESTA zones for any country exposed to Natural Perils Losses • Canadian CRESTA Zones developed in 1986 • CRESTA Accumulation reporting is at the Aggregate Level and continues to be the main way for Insurers to report aggregates to reinsurers • In some countries (not Canada) insurers report these on a quarterly basis • For Canada, CRESTA usually adopts any changes recommended by the Reinsurance Research Council

  6. Why CRESTA • Tropical Cyclone Tracey produced large losses to pro rata treaties, insurers and reinsurers realized that Cat loss potential was greater than they had previously believed • Reinsurers needed a standard method to estimate their own exposures • Today many Canadian insurers provide reinsurers with policy level data but there are still some insurers who struggle to provide this resolution of data • In the US policy level is the de factio standard but outside North America aggregates are still the most common data resolution

  7. Canadian CRESTA Zones

  8. 2003 Update of the CRESTA Earthquake Zones • In order to update the Catastrophe Risk Evaluating and Standardizing Target Accumulation (CRESTA) zones, the Insurance Bureau of Canada and the Reinsurance Research Council formed a joint committee. • A scenario approach defined areas where a single seismic event would have roughly the same damage ratios. • Soil conditions, past seismic activity, and shifts in population density (ie. Creation of new FSAs) and building construction information updates, helped to create the new updated CRESTA maps.

  9. Old CRESTA Earthquake Zones

  10. New CRESTA Earthquake Zones

  11. *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.

  12. *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.

  13. *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.

  14. *Note: 2001 population and dwelling figures based on the full 2001 Canadian Census from Statistics Canada.

  15. ICLR Earthquake Hazards Zones

  16. ICLR Hazard Zones • Developed primarily for insurers • Funding provided by Insurance Bureau of Canada and Reinsurance Research Council • Used CanadaQuake to simulate over 100,000 earthquake and develop Annual Loss Cost for each FSA • 6 Zones in each area (West = British Columbia, and East is Ontario and Quebec ) • Extreme, Very High, Moderate, Low, Very Low • These are not same Loss Cost in West and East • Paper “Earthquake Hazard Zones- The relative risk of damage to Canadian buildings” available at iclr.org

  17. Hazard Zones – Counts by FSA

  18. OSFI Default Loss Estimates

  19. OSFI Default Loss Estimates • What are DLE’s • Earthquake and Fire Following PML percentage for each earthquake CRESTA zone • Developed in 1997 • Used RMS, EQE and Munich Re model to create PMLs • Very conservative PMLs • Why DLE’s • OSFI needed some standard measurement of potential earthquake losses for insurers • Used for all insurers • Especially important for insurers that do not model their earthquake exposures • Use of DLE’s • Insurers use own aggregates to produce DLE PMLs which are compared to Modeled PMLs

  20. OSFI Default Loss Estimates • Revision of DLE’s for 2004 • IBC currently updating average PMLs for Munich Re, RMS and EQE models as models have changed considerably since 1997 and CRESTA zones just changed • Bases of DLEs may be New CRESTA Zones or New Hazard Zones

  21. The END

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