A modeling platform from Kinetic Analysis Corp. enabled researchers to drill deeply into large volumes of storm-related data spanning nine states and 140 years. Study finds that multi-state catastrophic risk pools offer significant benefits in major tropical events.
In the wake of the multi-state destruction wrought by the one-two punch of Superstorm Sandy and the nor’easter that followed, a new study suggests that geographically diverse, multi-state catastrophic risk pools provide clear financial benefits without creating subsidies between low and high risk areas. Sponsored by the Florida Catastrophic Storm Risk Management Center at Florida State University (FSU), the study was conducted utilizing the science-based risk modeling platform from Kinetic Analysis Corp., a specialist in multi-model impact forecasting and risk assessment for catastrophic events.
Mr Jones was supported by Mundingburra MP and Local Government Minister David Crisafulli at the luncheon who said he “agreed entirely with Ewen”
1. The TCIP public-private partnership has facilitated
the growth of the catastrophe insurance market in
Turkey. The number of earthquake policies sold
increased six times from 600,000 in 1999 (the year
before the TCIP’s establishment) to 3.5 million in 2010.
Turkey is regularly affected by natural disasters,
especially earthquakes and floods.
Impacts of such disasters and low levels of property
insurance coverage led the government to support the
establishment of a widespread and effective earthquake
property insurance system.
The World Bank helped the Turkish Government
develop the Turkish Catastrophe Insurance Pool (TCIP)
to limit the financial burden earthquakes place on the
government budget, focus government relief funds on
low income residents, and access international
reinsurance capacity in a cost effective manner. http://www.gfdrr.org/drfi Updated January 2011
GFDRR is able to help developing countries reduce their vulnerability to natural disasters and adapt to climate change, thanks to the
continued support of its partners: ACP Secretariat, Australia, Bangladesh, Belgium, Brazil, Canada, Colombia, China, Denmark, Egypt,
European Union, Finland, France, Germany, Haiti, India, Ireland, Italy, Japan, Luxembourg, Malawi, Mexico, The Netherlands, New
Zealand, Norway, Portugal, Saudi Arabia, Senegal, Spain, South Africa, South Korea, Sweden, Switzerland, Turkey, United Kingdom,
United States, Vietnam, Yemen, IFRC, UNDP, UN/International Strategy for Disaster Reduction, and The World Bank.
Around US$62/homeowner on average,
depending on construction type and
Earthquakes, fires following earthquakes
Residential buildings that fall within
Approximately US$92,000 per policy (as
of Jan. 1, 2009)
Through around 30 insurance companies
Main Terms and Conditions: Compulsory
Earthquake Insurance Scheme
The TCIP enables around 30 insurers to sell stand-alone
earthquake insurance policies, developing their
capacity in catastrophe insurance and significantly
increasing the availability and affordability of
earthquake insurance in Turkey.
2. Although the TCIP has been a success, it will take
time to achieve deeper market penetration in Turkey.
Today, the TCIP provides insurance coverage to 23% of
dwellings country-wide and about 40% in particularly
disaster prone areas. There has been the expectation
that the government will pay for damages to
households regardless of the insurance program. A
program like TCIP relies on a strong communication
strategy to ensure that residents are aware of
earthquake risk, mandatory insurance laws, and the
program’s excellent claim-paying record. The TCIP has
invested heavily in public education and marketing,
initiating many projects to increase public awareness
and understanding of its presence.
3. The provision of property catastrophe insurance
requires both technical capacity and financial
capacity. Catastrophe insurance requires highly
technical catastrophe risk modeling techniques to price
premiums that accurately reflect the underlying risk.
Ensuring financial viability also requires a balance
between increasing claims-paying capacity and the
cost of financing this capacity. At its inception, TCIP
had sufficient claims-paying to withstand a 1-in-100-
year event. Since then, it has increased its reserves and
strengthened its reinsurance capacity to sustain an
earthquake with a return period of 350 years.
Deductible: The dollar amount or percentage of an
insured loss that the policyholder must cover before
any claims are paid by the insurer.
Insurance pool: Collective pool of risk from multiple
insurance companies. Pooling facilitates the
development of insurance markets by spreading risk
across insurers who would otherwise lack financial
capacity to participate in the market. It enables
insurers to provide affordable coverage for high-risk
Reinsurance: Purchase of insurance by an insurer from
another specialty insurance company (the reinsurer)
for the purpose of spreading risk and reducing the
insurer’s own losses from large insurance claims.
Gurenko, E., Lester, R., Mahul, O., & Gonulal, S. O.
(2006). Earthquake Insurance in Turkey: History of the
Turkish Catastrophe Insurance Pool. Washington, DC:
World Bank, 2006.
Turkish Catastrophe Insurance Pool: http://www.tcip.gov.tr
Eugene Gurenko, Lead Financial Sector Specialist, T
An actuary is a business professional who deals with the financial impact of risk and uncertainty. Actuaries provide assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms (Trowbridge 1989, p. 7). The name of the corresponding profession is actuarial science.
Actuaries mathematically evaluate the probability of events and quantify the contingent outcomes in order to minimize the impacts of financial losses associated with uncertain undesirable events. Since many events, such as death, cannot be avoided, it is helpful to take measures to minimize their financial impact when they occur. These risks can affect both sides of the balance sheet, and require asset management, liability management, and valuation skills. Analytical skills, business knowledge, and understanding of human behavior and the vagaries of information systems are required to design and manage programs that control risk (BeAnActuary 2005a).
The profession has consistently ranked as one of the most desirable in various studies over the years. In 2006, a study by U.S. News & World Report included actuaries among the 25 Best Professions that it expects will be in great demand in the future (Nemko 2006). A study published by job search website CareerCast ranked actuary relative to other jobs in the United States as number 1 in 2010 (Needleman 2010), number 2 in 2012 (Thomas 2012), and number 1 in 2013 (Weber 2013). The study used five key criteria to rank jobs: environment, income, employment outlook, physical demands, and stress
National pool to subsidise high insurance premiums the
best solution, says Actuaries Institute
• High insurance premiums for flood-prone properties should be subsidised through a
temporary national funding pool
• Subsidies of premiums should be conditional on insurance policy holders and local
councils acting to reduce risk exposure
18 January 2012 – The financial impact on the insurance industry from floods and other
catastrophes, together with recent reports of significant premium increases, has prompted
the Actuaries Institute (the Institute) to reiterate today the need for a temporary national
pool to subsidise high insurance premiums.
“The Institute recommends the creation of a national pool of funds to subsidise the high
insurance premiums of people living in disaster-prone areas,” said Institute CEO Melinda
Howes. “However, any assistance provided shouldn’t encourage risk-taking behaviour
such as building in flood-prone areas.”
“Therefore it’s vital that any subsidies provided from the pool are conditional on policy
holders and local councils taking action to reduce the risk of damage from flooding, such
as carrying out the appropriate property renovations and building levees in high risk
For a number of reasons, the Institute does not favour direct government subsidies to
insurance policy holders.
“The alternative to a flood insurance pool that has been suggested – the government
providing direct premium subsidies – means the government gives money straight to
insurers, providing no incentive for households or local councils to manage their own risk
exposure,” said Ms Howes. “A national pool could also help those people who are not in
flood areas but have seen premium increases.”
As noted in the Institute’s submission to the National Disaster Insurance Review (NDIR) in
July last year, a national insurance pool could be funded in a number of ways, including taxpayer levies, a modest increase in premiums for all insureds, or direct government
The Institute also emphasised today that strategic activity to mitigate the community’s
exposure to flood risk should be undertaken by the government as a national priority.
“Next time there is a flood, uninsured losses and the call on government-funded
compensation will be even greater. So the underlying cause of potential flood and other
natural disaster losses – inappropriate development – needs to be addressed urgently
with the right mitigation measures, including revising building codes and planning rules,
building dams and levees, and relocating properties. This really is a case of a stitch in
time saving much more than nine,” said Ms Howes.
Anticipating the incidence of future weather events, the Institute noted that Queensland is
not the only state where large cities and towns have extensive flood exposure, and that
the cost of future flooding in other states could also be substantial.
“The largest flood on record in the Sydney basin was in 1867. If that event occurred
today, large parts of eastern and inner Sydney and the Nepean plains would be flooded,
causing untold devastation and potentially significant loss of life,” Ms Howes warned.
The Institute supports some of the measures announced by the government in its
response to the NDIR, including increasing the level of public awareness of risks through
a flood risk information portal and moves towards a uniform flood definition, but
emphasised these measures would do little to address the fundamental aspects of
Australia’s natural disaster insurance strategy – high premiums and the need to mitigate
the community’s flood risk exposure.
About the Actuaries Institute
As the sole professional body for actuaries in Australia, the Actuaries Institute represents the interests of its
members to government, the business community and the general public. Actuaries assess risks through
long-term analyses, modelling and scenario planning across a wide range of business problems. This
unrivalled expertise enables the profession to comment on a range of business-related issues including
enterprise risk management and prudential regulation, retirement income policy, finance and investment,
general insurance, life insurance, health financing, and climate change.
(02) 8248 3742 or 0412 800 781