Preparing for catastrophes and disasters 03 October 2013 Andi Vossberg

Preparing for catastrophes and disasters

03 October 2013Andi Vossberg

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1. Individuals

2. Insurance Industry

3. Government / Municipalities

4. Other parties

View of different stakeholders

3

1. Property damage

2. Injuries

3. Fatalities

4. Looting

Individuals


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1. Large number of claims

2. Many major claims

3. Sound coordination of claims personal

4. Shortage of loss adjusters

5. Too many claims assigned to an insufficient number

of adjusters

Insurance Industry - 1 -


5

6. Late appointment of adjusters with

international experience

7. Infrastructure

8. Little or no cooperation from the insured’s

in many cases

9. Generous advance payments without

supporting documents

10.Clients damage vs. own damage

Insurance Industry - 2 -


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1. First aid

2. Denial of access

Government / Municipalities


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1. Telecommunications

2. Public utilities

3. Hospitals

4. Aid organizations

5. Hotel facilities

Other parties


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• Day / night

• Weekend / working days

• Summer / winter

• Economical cycle > boom / recession

• Election years

Date of the event

Timing of event influencing the loss amount

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• Ensure efficiency in claims management

• Avoid organizational shortfalls

• Avoid loss of reputation

• Reduce overall cost

Proactive planning

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• Proactive or preventive actions

• Measures during catastrophe and its immediate aftermath

• Loss mitigation, repair, restoration, subsequent procedures

in the medium term

Designing countermeasures

1. Review corporate catastrophe plan

Establish employee internal teams and duties

Identify and prepare alternate place to conduct business

Data base back ups

Review employee personal contingency plans

Repeated awareness & training of contingency plans

2. Secure portfolio information

List of probable loss by CRESTA Zone, Geo coded information even better

Aggregates by risk

Insurers view:

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First steps before the occurrence

3. Local and international adjuster teams selection

Establish rates

Secure agreements and service providers contracts

Prepare uniformed forms and instructions as to the construction costs and

unitary prices

Secure list of approved experts

Inspect high exposure risks

Insurers view - continued:

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Cooperation with loss adjuster and insurer to optimize reporting

Smaller losses: Bordereaux showing loss amount on single risk basis

Large single losses: Reinsurers are interested in detailed reports.

Complex and facultative losses: General involvement of leading reinsurer

to be initiated by the cedents

The reinsurer


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No. Insurer Insurer Reinsurer AdjusterVolum. anal.

expert

Accounting expert

Restoration company

Insured

1 Identify Cat scenarios and areas of risks that may be affected X X X X

2 Elaborate own business continuity plan X X

3 Review general policy terms X ●

4 Issue policies and properly inform insureds on scope of cover and limits X

5 Inspect the risks and draw up loss prevention recommendations X ● X

6 Agree collaboration with adjusters, experts and restoration companies X X X X X X

7 Obtain individual contingency plans for adjusters, experts and restoration companies X X X X X

8 Obtain individual contingency plans from adjusters, experts and restoration companies X X X

9 Inform loss adjusters and accounting experts on scope of covers and limits X X X

10 Agree on method of reporting X X X X

11 Prepare check lists X X

12 Establish funds for dealing with losses immediately X X

13Annual meeting: to update contingency plans with all parties involved (for hurricane scenarios, before the start of the hurricane season)

X X X

X = involved party; ● = Optional

Preparation phase– coordination of activities between parties involved

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expert

Accounting expert

Restoration company

Insured

1Organize an emergency meeting to coordinate concrete activities when a hurricane is imminent or in the immediate aftermath of a cat event

X ● X X X X

2 Quantification of staff needs X X X X X

3 Assign specific works and tasks X X X X X

4 Instruct/engage adjusters, experts and restoration companies X ● X X X X

5 Inform again loss adjusters and accounting experts on scope of covers and limits X X X

6 Coordinate travel to the disaster area X X X

7 Coordinate lodging and service offices X X X X

8Purchase / hire of generating equipment and fuel, including operating and servicing personnel

X X X

9 Coordinate mobilisation of restoration equipment and materials X

10 Mobilisation to the disaster area X X X X

11 Obtain accommodation / food / drink in the disaster area X X X

12 Mobilisation of equipment and material X X

13 Set up provisional / temporary offices, workshops for restoration work X X X

14 Hire sheds to carry out the restoration work and keep the salvaged goods X X X

15 Inspect the risks affected / agree on measures to minimise damage X ● X X X X

16 Start restoration work asap X X X

17 Estimate of total damage X X X X


Actions following the NatCat occurrence coordination of activities between parties involved

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expert

Accounting expert

Restoration company

Insured

1Carry out survey, evaluation and documentation of individual losses together with the Insured’s representatives

X ● X X X X

2 Clearly separate direct damage from improvements or normal maintenance works X X X X

3 Draw up correct basis for unit prices and labour X X X

4 Estimate real cost of indemnifiable repairs and fix property damage reserves X X X

5 Coordinate repair and replacement work X X

6 Obtain financial data on the operation affected X X X

7 Estimate repair times and establish LOP reserves X X X

8 Recommend advanced payments where appropriate X

9 Advanced payments where appropriate X X

10 Verify appropriate execution of repair / replacement work affected X X X X

11 Obtain and verify invoices for repair / replacement X X

12 Quantification and sale of salvage X X

13 Final report on property damage X

14 Obtain accounting data on all of the property affected X X X

15 Verify that operations are resumed after completion of repairs

16 Final indemnity payment X

17 Final indemnity payment X X

18Draw up recommendations to avoid similar / identical losses in the future or at least minimize them as far as possible

X X X


Loss Adjusting– coordination of activities between parties involved

Chile in the immediate aftermath of the event

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Weakness of the infrastructure in the affected area aggravated the situation

- Utilities (electricity, water, telephones/communication network incl. cell phones)

interrupted for several days

- Damaged roads, fallen bridges, i.e. difficult access

- Hotel capacities largely reduced

Curfew limited the mobility during the initial weeks

Employees of industrial companies did not go to work for several days in order to

stay with their families

Lack of manpower and of construction material retarded the beginning of loss

minimisation measures and of repair works

Chile – The immediate aftermath of the event

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Chilean law requests:

Loss adjustment only through locally authorised loss adjusting companies

Full settlement of claims affecting private lines within 3 months of the loss

notification


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Challenges:

Mass losses at private buildings/apartments (mortgage insurance)

- Multiple loss notifications from the insured, the broker or the bank

- One building/several owners/different insurance policies

- Difficulties to decide on demolition vs. repair

Large industrial risks: Lack of clarity of certain insurance policies, i.e. on sums

insured for business interruption

Uncertainties regarding preliminary loss estimates, in particular with business

interruption claims

“Public adjusters” who work for the insured and raise expectation of higher

indemnifications


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Role of loss adjusters

Number of loss notifications superseded by far the initially available capacity of

local loss adjusters

Large complex losses required help of affiliated international organisations,

including forensic accountant experts in BI

4 – 6 weeks needed to drastically increase office space, manpower and

equipment . Beginning of efficient work only then

Large number of claims made it unable to comply with 3 months settlement

request. This timeframe had to be extended

By the end of 2010 vast majority of householders’ claims were settled

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Total 31 Aug. 2010 28 Feb. 2011

Paid indemnification: USD 2.190 bn USD 4.656 bn

Commercial / Industrial 31 Aug. 2010 28 Feb. 2011

Number of claims notifications: 31,866 31,811

Liquidated claims: 16,970 28,294

Closed claims (paid or to be paid): 8,793 15,666

Not indemnifiable (e.g. below deductibles): 7,298 12,152

Paid indemnification: USD 3.365 bn

Homeowners 31 Aug. 2010 28 Feb. 2011

Number of claims notifications: 190,199 189,491

Liquidated claims: 156,242 188,478

Closed claims (paid or to be paid): 105,694 125,904

Not indemnifiable (e.g. below deductibles): 46,336 62,574

Paid indemnification: USD 1.291 bn

Statistics

Stipulations in Chile

Deductibles are regulated for residential and commercial risks as follows:

• Residential risks: 1% of sum insured, min. UF 25 (approx. USD 1.000)

• Commercial risks: 2% of sum insured, min. UF 50 (approx. USD 2.000)

Consequences

• Homeowners complaint against deductibles

• Political Issue. Superindendence asked insurance industry to withdraw

deductibles

• Insurance industry did not accept withdrawal and explained why

deductibles are an absolute need in Nat Cat

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Mass claims – impact of deductibles

0 25 50 750

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Claims below deductible (22.000)

Number of Claims vs. Deductible [UF]

Mass Claims – Residential Risks Portfolio (example)Number of Claims

Deductible [UF]

Num

ber

of c

laim

s

UF 1 = approx. USD 40

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25

0 25 50 750

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

Deductible [UF]

Indemnity 100% [USD] vs Deductible [UF]

UF 1 = approx. USD 40

Claims below deductible (ca. USD 28 m)

Mass Claims – Residential Risks Portfolio (example)Amount of Indemnity

THANK YOU VERY MUCHFOR YOUR ATTENTION.

Andi Vossberg

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Preparing for catastrophes and disasters 03 October 2013 Andi Vossberg