Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Lloyd’s Realistic Disaster Scenarios 14th October 2004 Background to Lloyd’s In existence since 1688 World's leading insurance market 66 syndicates Over 160 brokers Capacity of approximately £15.0 billion Profile of the Lloyd’s Market Lloyd’s Franchisor CLIENTS Reinsureds Commercial MEMBERS 168 Lloyd’s Brokers 66 Syndicates £15.0bn Capacity AM Best: A AS&P: A Personal BUSINESS FLOW Source: Lloyd’s 53 Corporate Groups 45 Managing Agents Service Companies 4 Members’ Agents 2,048 Individuals Members (Unlimited liability) 637 Conversions (Limited liability) CAPITAL PROVISION Profile of Lloyd’s Capacity & Managing Agents Ca pa c i t y M ov e me nt Market Capacit y £ Bn 16 14 12 10 8 6 4 2 0 No. of syndicat es No. of Managing Agent 200 150 164 66 100 50 68 45 0 1997 1998 1999 2000 2001 2002 2003 2004 Lloyd’s Realistic Disaster Scenarios (RDSs) Lloyd’s RDSs were introduced in 1995 Requiring syndicates to carry out disaster planning Based on a range of hypothetical scenarios Scenarios mainly based on historical disasters “Failure of North Sea Complex” – from Piper Alpha “Marine Collision” – from Exxon Valdez “Japanese Earthquake” – from 1923 Great Kanto Event RDS Overhaul Project Two year RDS Overhaul Project Improve consistency of risk assessment Raise Loss Modelling standards in the market Collaborative Process Market Experts Group Lloyd’s Market Association – Marine RDS AIR, EQECAT and RMS Florida Windstorm California Earthquake Overhaul to be Completed in April 2005 Will take account of feedback received in 2004 Why Overhaul the RDSs? To provide a more reliable and accurate measurement of risk, based on a more comprehensive and consistent approach To measure the market’s and syndicates’ exposures to a series of major catastrophes RDS assumptions and practices varied widely Significant variations observed in “Aggregate” to “Gross Loss” relationships Wide variations in methodologies To provide a better understanding of Lloyd’s aggregate risk profile For catastrophes As an input to capital setting and allocation decisions As an input in managing Central Fund exposures RDS Guidance and Instruction Issued in April 2004 Replaces previous “Regulatory Bulletins” with a comprehensive guide to the assessment of catastrophe exposures REALISTIC DISASTER SCENARIOS APRIL 2004 Key sections include Definitions Calculation Principles Recommended Best Practice “Event Subset” Submissions Scenarios and Events Available on Risk Management Website www.lloyds.com/riskmanagement Guidance and Instructions Scenarios and Events SINGLE RISK SCENARIOS AGGREGATING SCENARIOS 1 USA Windstorm 11 Second Event 2 Marine Event 12 Florida Windstorm 3 North Sea – Loss of Major Complex 13 California Earthquake 4 Aviation Collision 14 New Madrid Earthquake 5 Major Risk Loss 15 European Windstorm 6 Satellite Risks 16 Japanese Earthquake 7 Liability Risks 17 Terrorism 8 Political Risks 9 Alternative RDS: A 10 Alternative RDS: B Marine RDS Syndicates must return two scenarios Collision in Prince William sound Major Cruise Vessel Incident Increased guidance for both scenarios Specification of losses to the International Group of P&I Associations Reinsurance Programme. Marine collision in Prince William Sound Cruise Vessel Tanker Owner Protection and Indemnity Protection and Indemnity US$ 2,050m US$ 2,050m Layer 4 Layer 4 US$ 1,550m US$ 1,550m Layer 3 Oil Pollution US$ 1,050m Oil Pollution Layer 2 Layer 2 US$ 1,050m Layer 2 Layer 2 POOL RETENTION Owned Entries Layer 1 US$ 187.5m US$ 50m Layer 1 POOL RETENTION Owned Entries Coinsurance 25% Layer 1 Coinsurance 25% Layer 1 Coinsurance 25% US$ 437.5m Coinsurance 25% US$ 600m US$ 550m US$ 550m US$ 50m Layer 3 California Earthquake EXPOSURE DISTRIBUTION EVENT FOOTPRINTS Catastrophe Loss Modelling Software – Florida Windstorm & California Earthquake Three agencies - AIR, EQECAT & RMS Working with the three catastrophe modelling agencies has enabled us to: Specify new events tightly, by industry loss level US$70bn and $54bn respectively Specify 2 events of similar magnitude Based on Commercial (including Industrial) and Residential losses Better coverage of risk (e.g. LA and San Francisco) Derive Average Damage Factors Feasible events cannot destroy all properties Florida Windstorm and California Earthquake County level “Footprints” County level damage factors Derived from discussions with AIR, EQECAT and RMS Prompt for additional lines of business to include “Aggregate” to be based on county exposures in “Footprint” Marine, Specie/Fine Art, Personal Accident, Aviation, Liability Exclusion of classes viewed as “impossible” to model Contingent Business Interruption Aviation Hull in Earthquake RMS “Roll-up” exercise Pilot study with five managing agents Combining Event Loss Table output To validate choice of new RDS events To assess feasibility of combining syndicate results Analysis split by broad business categories Direct & Facultative Treaty Binder RMS “Roll-up” exercise – California EQ D&F Lloyd's Sample Loss D&F Benchmark Events RMS Industry Loss RMS “Roll-up” exercise TREATY Lloyd's Sample Loss Treaty Benchmark Events RMS Industry Loss RMS “Roll-up” exercise BINDERS Lloyd's Sample Loss Binder Benchmark Events RMS Industry Loss Terrorism RDS Terrorism RDS 2-tonne conventional bomb attack on Empire State Building Damage zones and levels specified in scenario TRIA and non-TRIA events Specification of deaths, injuries and BI Fire-following, Number of Events and CBRN Guidance Focus on data resolution Address-level best for urban accumulations Guidance for proportions in 10001, 10016 and 10018 Terrorism RDS Data Resolution Source: Munich Re. Topics Geo 2003 RDS Results Playback Visits Each Managing Agent visited by two or more Risk Executives General questions asked concerning: Data capture and resolution of data Identifying relevant policies Loss calculation and expected values The return process & quality assurance Modelling methods Review of one RDS scenario from start to finish RDS Results Playback Packs Every syndicate receives a pack prepared solely for their own use. Contains syndicate specific analysis on: Aggregate, Gross, Net and Final Net losses Losses in relation to capacity and hence Franchise Performance Guidelines Ranking within the market Includes analysis on modelling types at both market and syndicate level for each scenario. Graphical representation of Losses, Average Damage Factors (ADFs) and Ranking. RDS Results Modelling Type Analysis Modelling type - Market Licensed Softw are(AIR/EQECAT/RMS) Modelled Internally Maximum Line Market Share Premium Derived M arine Co llisio n in P rince William So und Sunk/Damaged Cruise Liner M ajo r Risk Lo ss Seco nd Event USA Windsto rm A lternative RDS B No rth Sea Co mplex A lternative RDS A Specific Euro pean Windsto rm Lo s A ngeles San Francisco Specific New M adrid Earthquake Specific Japanese Earthquake M iami Tampa B ay Liability No n-TRIA Event TRIA Event 0% 10% 20% 30% 40% 50% 60% 70% Percentage of Gross Loss by Modelling type 80% 90% 100% Four-Stormed is Forearmed 14 October 2004 How Hurricanes are Formed Thunderstorms drift over warm ocean waters. Warm air from the storm and ocean surface combine and begin rising, creating low pressure. Trade winds blowing in opposing directions cause the storm to start spinning. The rising warm air causes pressure to decrease at higher altitudes. Air rises faster and faster to fill this low pressure, in turn drawing more warm air off the sea and sucking cooler, drier air downwards. As the storm moves over the ocean it picks up more warm, moist air. Wind speeds start to increase as more air is sucked into the low pressure centre. It can take hours or several days for a depression to grow into a fully-formed hurricane. Lloyd’s 2004 Realistic Disaster Scenarios Distribution of Florida Property Values Hurricane Charley – The facts Hurricane Charley made landfall at Sanibel Island, Florida, late on the afternoon of 13 August 2004. Maximum sustained winds were near 145 mph after upgrading to a Category 4 storm, causing severe damage and flooding in coastal areas. Hurricane Charley had been expected to make landfall near Tampa, 120 miles to the north, but shifted course at midday and brushed low-lying islands. Charley was responsible for the death of 27 people in Florida. RDS 2004 Pinellas Hurricane Event Footprint Estimation of track of Hurricane Charley Hurricane Frances – The facts Hurricane Frances made landfall at Sewall’s Point in Martin County, Florida, at 05:00 GMT on Sunday 5th September. Maximum sustained winds were near 105 mph and Frances dropped more than 33cm of rain along Florida’s east-central coast. Insured losses will be limited because much of the damage has been caused by flooding, which is covered by the National Flood Insurance Program. Frances was responsible for the death of 23 people in Florida. RDS 2004 Miami-Dade Hurricane Event Footprint Estimation of track of Hurricane Frances Tracks of Hurricane Charley & Hurricane Frances Source: Guy Carp.com. Cat-i Reports Hurricane Frances Update- Report 10, September 7, 2004 Hurricane Ivan – The facts Hurricane Ivan made landfall just west of Gulf Shores in Baldwin County, Alabama at 07:00 GMT on Thursday 16th September. Maximum sustained winds were near 130 mph when it came ashore and subsequently moved inland and weakened. Ivan was responsible for the death of at least 50 people in the United States in addition to over 70 people in the Caribbean. Tracks of Hurricanes Charley, Frances & Ivan Source: Guy Carp.com. Cat-i Reports Hurricane Ivan Update- Report 13, September 17, 2004 Hurricane Jeanne – The facts Hurricane Jeanne made landfall near Hutchinson Island just east of Stuart in Martin County, Florida at 04:00 GMT on Sunday 26th September. Maximum sustained winds were near 120 mph (Cat 3) when it came ashore and subsequently moved inland and weakened. Jeanne was responsible for the death of at least 3,000 people in Haiti mainly due to flooding and 8 people in Florida. Track of Hurricane Jeanne Source: Guy Carp.com. Cat-i Reports Hurricane Jeanne Update- Report 7, September 27, 2004 Tracks of the Four Hurricanes Source: Guy Carp.com. Cat-i Reports Hurricane Jeanne Update- Report 7, September 27, 2004 Industry Loss Estimates RMS EQECAT AIR Charley USD 6-8bn USD 5-10bn USD 6-10bn Frances USD 3-6bn USD 2-5bn USD 5.6-8.7bn Ivan USD 3-6bn USD 4-10bn USD 3-6bn Jeanne USD 4-8bn USD 6-14bn USD 5-9bn