July 2012

Spotlight – In international business, almost every market around the world does things in a different way. This often leads to misunderstandings and unfulfilled expectations. However, different does not need to mean difficult and knowledge of the needs and characteristics of specific geographic markets is an advantage to those who are active in the global economy. These articles help you understand different aspects of the insurance industry around the world, enabling those who do business there to feel more “at home, abroad.”

During the past 18 months or so, Christchurch has suffered from some very serious earthquakes, one of them causing significant damage and tragic loss of life. Much has been reported on the measures taken after the events which have been widely praised. Nevertheless, for many residents of New Zealand’s third largest city, it will take a long time, if ever, for them to recover economically.

Insurance has played a big role in helping with the city’s recovery. Studies are made to help people identify and learn the lessons such natural catastrophes bring with them. One aspect of insurance and risk management is: prevention is better than cure. Few knew of a fault lying beneath the Canterbury plains because it had been dormant for more than 16,000 years. Therefore, seismologists and risk modellers did not take this into account when assessing the earthquake risk for the area.

Recently, at the FIAR Insurance and Reinsurance Seminar in Romania, a paper was presented which discussed the now known seismology, the earthquake insurance framework, how the insurers and reinsurers fared along with property/land owners as a result of the earthquakes during the period of September 2010 to December 2011 when there were 433 aftershocks greater than magnitude 4 on the Richter scale. We are very pleased to have permission to publish this paper, with its facts and recommendations all very useful for predicting risk, anticipating loss frequencies, etc, as well as providing examples of claims scenarios which enable property owners to be better prepared in future. This paper is prepared by Milliman, one of the world’s largest independent actuarial and consulting firms (http://cee.milliman.com/en/home/) and any questions should be forwarded to Adrian Allott (adrian.allott@milliman.com) in Bucharest.

Please click here to read this paper.