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1 Sinaia, 22 May FIAR 2012, SINAIA, ROMANIA Session on Catastrophic Risks Insurance Natural Catastrophe Risk Management Experiences and perspectives Roland NUSSBAUM Managing Director of Mission risques naturels (MRN), Paris, FR AFPCN Board, FR National DRR Platform

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2 Sinaia, 22 May Preambles Former presentations to the Romanian insurance market What dit happen since 5 yrs? FIAR

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3 Sinaia, 22 May An association dedicated to NatCat risk knowledge and reduction, in partnership with public authorities, created in 2000 between: Mission des socits dassurances pour la connaissance et la prvention des risques naturels www.mrn.asso.fr What is MRN ?

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4 Sinaia, 22 May Permanent staff members: engineers, geoscientists, PhD students Collaborative network of hundreds of correspondents : insurance companies State and local authorities Stakeholders and thematic associations The MRN team

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5 Sinaia, 22 May Activities of the association Institutional Operational Studies

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6 Sinaia, 22 May Geoservices Studies Extraction Cleaning Interpreting Integration Data warehouse Observatory Transactional and geographic DB Products and services of general interest Analyses Reporting Methods Models GENERIC (all risks)THEMATIC (risk specific) MRN GIS Platform

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7 Sinaia, 22 May Areas subject to storm surge Preliminary assessment of storm surge exposure number of property assets (personal and commercial lines / CRESTA zone) MRN asset exposure observatory

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8 Sinaia, 22 May A web based GIS tool to support insurance professionnals on the natural hazard exposure analysis for the sites of a commecial lines customer MRN intranet geoservices infrastructure Users

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9 Sinaia, 22 May R.NUSSBAUM Use of MRN conventional hazard data sets at company level Analysis of a commercial lines porfolio exposure to floods

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10 Sinaia, 22 May Natural Catastrophe Risk Management Experiences and perspectives OUTLINE NatCat Insurance Schemes in the EU 30 Yrs of French experience, Lessons learnt Risk knowledge, a main PPP issue Concluding remarks

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11 Sinaia, 22 May Insurance Schemes in Europe source : Insurance Europe * + Key: Optional Coverage Compulsory extended coverage: Recently put in place In project Minimal role played by insurers Colour intensity proportional to penetration rate of Natural Hazard coverage Insurance schemes widely vary across Member States due to: Different levels of risk exposure Underestimation of risk (ie low risk perception) Lack of awareness about risk prevention Anticipation of state aid or compensation

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12 Sinaia, 22 May 1. NatCat Insurance and risk management: 30 Years of experience in France, as an example Loss records Lessons learnt from a recent event: Xynthia An integrated DRM scheme Insurance component Prevention component Risk basin strategies / governance towards sustainability Lessons learnt and further developments

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13 Sinaia, 22 May subsidence Sources : FFSA-GEMA (2011) & MEDDTL / BD GASPAR (2011) Author : MRN May 2011 windstorms floods 1.1. Property damage losses caused by natural catastrophes in France AFIR 6 Special Session I

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14 Sinaia, 22 May Sources : FFSA-GEMA (2011) & MEDDTL / BD GASPAR (2011) Author : MRN May 2012 AFIR 6 Special Session I 1.1. Property damage losses caused by natural catastrophes in France

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15 Sinaia, 22 May Carte de rpartition par dpartement de la centaine dvnements complmentaires source BD GASPAR, SANDRE, traitements MRN

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16 Sinaia, 22 May 1.2. XYNTHIA 28 February 2010 Winter storm and storm surge

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17 Sinaia, 22 May 1.2. Property damage losses Xynthia Event 28 February 2010 53 fatalities and 79 injured people in France More than 2.5 bn of economic losses, out of which 1.5 bn insured losses CoverTotal insured loss Nb of ClaimsAverage cost CATNAT (storm surge) 0,75 bn 35 00021 000 Windstorm0,75 bn 435 0001 700

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18 Sinaia, 22 May 1. NatCat Insurance and risk management: 30 Years of experience in France, as an example 1.3. An integrated DRM legal and regulatory scheme FIAR 2012

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19 Sinaia, 22 May 1.3. An integrated DRM scheme (1) Mapping environmental risks, according to insurability and associated insurance solutions in France Storm Hail Snow Hurricane Earthquake Volcanic Landslide Subsidence Avalanche Flood ) Assurablility Cover TGNCATNAT CatTech Risks (law 21 July 03) Natural hazards Technological other environmental risks CatTECH IRD RI Environmental liability insurance ASSURPOL Pool Domino effects Environmental liability (law 01 August 08) Mesurable deteriorations : Water Soils Protected Species and Habitats Mesurable impacts on their ecological services Forest Fire Thunder

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20 Sinaia, 22 May 1.3. An integrated DRM legal scheme (2) NatCat 1982 law, revised 1995, 2003

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21 Sinaia, 22 May Compulsory extended coverage to property damage contract Cover type, level of premium and basic deductible are the same for all insureds, adopted by law Insurance-like business, excess of annual losses by direct insurers are topped at 100 % loss ratio on retention after 50% quota share State operating as reinsurer of last resort, on top of CCR (State owned reinsurance company) both QS & annual stop loss reinsurance treaties The cover (indemnity based, no limitation) is triggered by administrative recognition of natural catastrophe at the level of each affected municipality 1.3. Main features of NatCat insurance scheme Insurance compoent AFIR 6 Special Session I

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22 Sinaia, 22 May 1.4. Risk reduction incentives within the CATNAT scheme RISK REDUCTION COMPONENT AFIR 6 Special Session I

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23 Sinaia, 22 May Risk reduction incentives within the CATNAT scheme RISK REDUCTION COMPONENT AFIR 6 Special Session I

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24 Sinaia, 22 May Risk reduction incentives within the CATNAT scheme RISK REDUCTION COMPONENT AFIR 6 Special Session I

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25 Sinaia, 22 May A 12% levy on NatCat premium (150 Mio ) is financing a public Fund ( Barnier Fund ), dedicated to subsidize: At individual level (must be insured): o Expropriation from highly exposed assets o Friendly acquisition of property if severely affected o Vulnerability reduction measures within the limit of 40 % of total costs ( studies and works) At community level : o PPRN studies (50 % of their costs) o DRR structural and non structural measures taken by communities (PAPI, PSR), within the limits of 20 to 40 % of their total costs o Risk awareness raising and insuruance information campaigns Risk reduction incentives within the CATNAT scheme Volet prvention

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26 Sinaia, 22 May 1. NatCat Insurance and risk management: 30 Years of experience in France, as an example 1.4. Risk basin strategies / governance towards sustainability FIAR 2012

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27 Sinaia, 22 May Risk retention and transfer along LEP Curve (for floods under NatCat regime) Without DRR measures at risk basin levelWith structural DRR measures at risk basin level

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28 Sinaia, 22 May Source : Stratgie damnagement lhorizon 2013 pour lutter contre les inondations sur le bassin de lOise, Entente Oise Aisne, 2009 1.4. Flood risk reduction strategy of a floodplain management authority (1)

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29 Sinaia, 22 May 1.4. Flood risk reduction strategy of a floodplain management authority (2) Source : Stratgie damnagement lhorizon 2013 pour lutter contre les inondations sur le bassin de lOise, Entente Oise Aisne, 2009

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30 Sinaia, 22 May 1. NatCat Insurance and risk management: 30 Years of experience in France, as an example 1.5. Lessons learnt and future developments FIAR 2012

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31 Sinaia, 22 May 1.5.1. Lessons learnt Too many events unavoided, Several significant events, but No extreme event in 30 yrs Very efficient/popular scheme, despite compulsory extension Delayed DRR policies and measures, although recent significant improvements at all levels, but effects on average annual loss are a long term issue FIAR

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32 Sinaia, 22 May

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33 Sinaia, 22 May 1.5.2. Future developments Implement risk knowledge, as major DRR governance decision making tool (see 2.), involving stakeholders as producers and/or end users Proposal of a law introduced last month, with the following main changes on FR NatCat scheme: Introduce objective recognition criteria for events Allow insurers to differentiate NatCat ratings for commercial lines Restricted conditions for subsidence coverage FIAR

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34 Sinaia, 22 May 2. Risk knowledge, a main PPP issue

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35 Sinaia, 22 May 2.1. Present situation of NatCat risk knowledge in FR Public hazard data are a main input to insurance market, through MRN hazard / risk knowledge management tools : Observatories of public hazard data coverage, exposure, public prevention policies efficiency Services to the insurance companies Launching of a National Observatory for Natural Risks (ONRN), as a main imput for DRR governance decision making, with public/private stakeholders Data sets coverage & quality evaluation, sharing & dissemination, Hazard/Risk mapping, open source modelling methodologies and decision making tools development & uses

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36 Sinaia, 22 May

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37 Sinaia, 22 May 37 Sample flood risk indicators (1)

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38 Sinaia, 22 May Sample flood risk indicators (2)

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39 Sinaia, 22 May Sample flood risk indicators (3)

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40 Sinaia, 22 May Concluding remarks

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41 Sinaia, 22 May To summarize on DRM/DRR and related domains: legal/cooperation frames, at international, regional and national levels DomainUN scaleEU scaleFrench scale Prevention HFA* Dir. Flods (2007) Dir. INSPIRE (2007) EUROCODES 8 & 20 CCA & DRR Strategies Codes (2003) environment, spatial planning, construction-habit. Civil Protection MDG HFA IDRL (Intl Red Cross Red Crescent) Financial Instrument (2007) Communautary mechanism (2007) New civil protection law (2004) Economic resilience (incl. Risk transfer) MDG HFA IAIS Art. 122.2 Treaty EUSF (2002) Dir. Solvency II (2009) EIOPA / Cat TF Code envt: Fds Barnier Insurance Code;: Insurance scheme Prudential regulations (*) Hyogo Framework for Action and Millenium Development Goals Other domains of UN conventions integrating NatCat prevention (by order of apperance) : Heritage, Human Rights, Cross border rivers and lakes, Alpine region, CCA

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42 Sinaia, 22 May Trend towards integrated DRM costs control Is it an equilibrated country profile? Source : PLANAT, 2007, Safety at which cost?

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43 Sinaia, 22 May Conclusion Major trends for NatCat insurance schemes Integration of Risk Financing and Transfer within DRM at most governance levels Convergence towards: Risk metrics methods, including LP-HI scenarios, Loss, exposure and DRR policy data shared at appropriate aggregation level, Holistic risk based approaches & decision making tools Risk governance bodies involving stakeholders, all relevant scales Innovative risk transfer and public private partnerships to address these issues

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44 Sinaia, 22 May Wood sculpture of Atlas cedar tree, that was fallen by MARTIN Storm of 27/12/99 roland.nussbaum@mrn.asso.fr Thank you for your attention