The cooperation of insurers loss adjusters and reinsurers before a large loss occurrence
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The Cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence. 12 th September - Istanbul Georg Feierabend, Property Claims Manager, Europe/Latin America. The insurer. First steps before the Occurrence . 1. Review Corporate Catastrophe Plan

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The cooperation of insurers loss adjusters and reinsurers before a large loss occurrence

The Cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence

12th September - Istanbul

Georg Feierabend, Property Claims Manager, Europe/Latin America


First steps before the occurrence

Theinsurer

First steps before the Occurrence

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

    2. Secure Portfolio Information

  • List of probable loss by CRESTA Zone

  • Aggregates by risk

    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

2

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Critical issues

Theinsurer

Critical Issues

  • Shortage of experienced licensed Adjusters

  • Shortage of resources to handle BI claims

  • Insufficiency of Insured’s information

  • Inadequate Insured's business recovery plans

  • Lack of employees recovery plans

3

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Preparation before an occurrence 1 2

Thereinsurer

Preparation before an occurrence (1/2)

  • The reinsurer shall:

  • Work out together with the cedentNatCat contingency plans that can be adapted for the individual local application

  • Check the capabilities of loss adjuster companies, recommend loss adjusters and restoration companies with proven expertise and good reputation (regional as well as international background and network).

  • Carry out inspections together with the cedent to learn about quality standards of the local risks and work out improvement strategies, if necessary

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Preparation before an occurrence 2 2

Thereinsurer

Preparation before an occurrence (2/2)

  • Cooperation with the loss adjuster and the insurer to optimize the reporting.

  • Munich Re is interested in detailed reports about large single losses.

  • For smaller losses, it is necessary to provide bordereaux showing all affected risks and every single loss amount.

  • For complex losses and losses on facultative risks, the involvement of the reinsurer is generally necessary and shall be initiated by the client.

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


After the occurrence

Thereinsurer

After the occurrence

  • The reinsurer establishes reserves and submits advance payments according to loss estimates of the insurers, confirmed by statistical models of natural perils experts of the reinsurer.

  • Models of insurers and reinsurers/brokers should be aligned in close cooperation before loss occurrences to avoid large discrepancies in case of an event.

  • MunichRe offers local support with claims manager(s) and/or accounting personnel to improve and accelerate the cooperation between insurer, reinsurer, loss adjuster and insured.

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Preparation phase coordination of activities between parties involved

Preparation phase– coordination of activities between parties involved

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence

X = involved party; ● = Optional


Actions following the natcat occurrence coordination of activities between parties involved

Actions following the NatCat occurrence coordination of activities between parties involved

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence

X = involved party; ● = Optional


Loss adjusting coordination of activities between parties involved

Loss Adjusting– coordination of activities between parties involved

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence

X = involved party; ● = Optional


Natcat claims management

NatCat Claims Management

Residential risks

Commercial / industrial risks

Mass Claims: Very large number

of small / medium size

claims

Individual

major claims

Two different groups of claims that have to be tackled using

different strategies

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Experienced example

ExperiencedExample

27F

Chile27 Feb. 2010

Earthquake of magnitude 8.8 Richter + tsunami

Casualties: ~ 500

Insured loss: US$ 8bn

Munich Re reserve: US$ 1.1bn

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence

11


Munich re

Munich Re …

  • installed a task force in Santiago 5 days after the event

  • contacted the cedents immediately and offered quick support in form of advanced payments

  • agreed with cedents efficient processes, for e.g. adjusting massive numbers of small claims

  • showed continuous local presence for the whole year 2010 with claims managers actively participating in loss surveys

  • consulted the cedents in selecting loss adjusters or forensic accountants for large, complex claims

  • conducted claims reviews at the claims dept. of ceding companies

  • collaborated with the local association of insurers for drafting lessons learnt

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


The chilean insurance market in the immediate aftermath of the event

The Chilean Insurance Marketin the immediate aftermath of the event

  • 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.

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Problems related to the loss adjusting process

Problems related to the loss adjusting process

  • Chilean law allows adjustment only to locally authorised loss adjusting companies

  • Chilean law requires full settlement of claims affecting private lines within a timeframe of 3 months from the date of the loss notification. Enforcement by the Superintendencia de Valores y Seguros, Chile (SVS)

  • 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

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Role of the loss adjusters

Role of the Loss Adjusters

  • Number of loss notifications superseded by far the initially available capacity of local loss adjusters

  • For the adjustment of large, complex losses some of the local loss adjusters had to require the help of their own or affiliated international organisations as well as forensic accountants expert in business interruption losses

  • After 4 – 6 weeks the loss adjusters managed to drastically increase their capacity in terms of manpower, office space, office equipment and could start to work efficiently

  • Due to the very large number of claims the loss adjusters could not comply entirely with the SVS requirements. They had to demand for and obtained a general postponement of the compulsory time limit of 3 months for claims settlement.

  • By the end of 2010 the vast majority of the householders claims could be settled

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Statistics

Statistics

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Mass claims impact of deductibles

Mass Claims - Impact of Deductibles

Regulations 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 started complaining against the height of the deductibles and this turned out to be a political issue. The Superintendency (SVS) asked the insurance industry to withdraw the deductibles.

    The insurance industry did not accept and explained why deductibles are absolutely needed in case of NatCat.

The co-operation of insurers, loss adjusters and reinsurers before a large loss occurrence

17


Mass claims residential risks portfolio example number of claims

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

Number of Claims vs. Deductible [UF]

UF 1 = approx. USD 40

Number of claims

Deductible [UF]

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Mass claims residential risks portfolio example amount of indemnity

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

Indemnity 100% [USD] vs Deductible [UF]

UF 1 = approx. USD 40

Claims below deductible (ca. USD 28 m)

The cooperation of insurers, loss adjusters and reinsurers before a large loss occurrence


Thank you for your attention let s work together

Thank you for your attentionLet’s Work Together!

Georg Feierabend


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