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Governmental Solutions for Earthquake Exposure Non - US

Governmental Solutions for Earthquake Exposure Non - US. Douglas J. Collins, Tillinghast-Towers Perrin CAS Cat Risk Seminar - October 17, 2000. Number of Significant Earthquakes 1950-1999. Governmental EQ Solutions: Non - US. Earthquake-only Facilities Japan New Zealand

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Governmental Solutions for Earthquake Exposure Non - US

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  1. Governmental Solutions forEarthquake ExposureNon - US Douglas J. Collins, Tillinghast-Towers Perrin CAS Cat Risk Seminar - October 17, 2000

  2. Number of Significant Earthquakes 1950-1999

  3. Governmental EQ Solutions: Non - US • Earthquake-only Facilities • Japan • New Zealand • Multi-Peril Facilities • Costa Rica • Norway • Spain • Facilities under discussion • Turkey

  4. Japan Earthquake Reinsurance Company (JER) • Established in 1966 • Mandatory reinsurance of primary carriers • primary is voluntary with low take-up • Coverage for: • Dwellings and contents • Earthquake, volcanic eruption, tsunami • ACV with AOI = 30% to 50% of fire limit • Defined payouts - total loss, half loss, partial loss • Aggregate loss up to 4,100 billion Yen ($41B) • Government funds up to 85% • Rates • 0.5% to 4.3% of insured value

  5. JER - 1999 Risk Sharing Scheme • Up to 75B Yen • 100% private insurers • Over 75B Yen up to 820B Yen • 50% private, 50% government • Over 820B Yen up to 4,100B Yen • 5% private, 95% government • Payments pro-rated if loss greater than 4,100B Yen

  6. New Zealand Earthquake Commission (EQC) • Established in 1944 • Provides primary insurance • Coverage for: • Dwellings, contents and land • Earthquake, volcanic eruption, tsunami, landslip, hydrothermal activity and fire following (and land damage due to flood) • Replacement cost up to NZ$120K • Deductible 1% of claim • Funded aggregate limit of NZ$4.8B (US$2.4B), plus government guarantee • Rates: 5% of homeowners premium

  7. Multi-peril Facilities • Instituto Nacional de Seguros de Costa Rica (INS) • State-owned monopolistic insurer for P/C, L/H • Offers earthquake coverage • Norsk Naturskadepool • Compulsory Norwegian reinsurance pool for natural perils including earthquake, flood, windstorm, avalanche, volcanic eruption, tidal wave (Occ limit NOK 2.8B, approx $300M) • Consorcio de Compensacion de Seguros (Spain) • State guaranteed organization providing insurance coverage for natural and other catastrophes

  8. Turkish Catastrophic Insurance Pool (TCIP) • Government of Turkey requested assistance by the World Bank • Response to 8/99 Marmara earthquake • Estimated economic cost $13.5B (6.6% of GNP) • Mandatory EQ coverage to dwellings • Operational structure dependent on Turkish insurance industry • Implementation of design is ongoing

  9. Fund Administrative Issues • Mitigation/research • Disaster recovery • Funding • Government committment

  10. Sources of Information • Resources at Tillinghast-Towers Perrin • New Zealand EQC web page (www.eqc.govt.nz) • Best’s Insurance Reports International • Guy Carpenter report, “The World Catastrophe Reinsurance Market 2000” • National Geophysical Data Center (www.ngdc.noaa.gov)

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