in taiwan, ty/fl insurance is an - apec typhoon - wenko hsu.pdf · 8 the most exposure of the...

2015 International Workshop on Typhoon and Flood- APEC Experience Sharing on Hazardous Weather Events and Risk Management

2015/05/27

Taipei

Page:


Outlines

The typhoon/flood disasters in Taiwan Typhoon/flood insurance in Taiwan Introduction of Catastrophe risk model (CAT

Model) Ratemaking- Using CAT Model Conclusions

1

Page:


The Statistic of Casualties-induced by Typhoon/Flood from 1958 to 2012

2

0

500

1000

1500

2000

2500

3000

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Nnu

mbe

r of p

erso

n

Year

Death Missing Wounded

MORAKOT

87 Flood

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3

The number of building damaged by Typhoon/ Flood from 1958 to 2012

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,00019

5819

6019

6219

6419

6619

6819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

12

Num

ber o

f Bld

g.(H

ouse

hold

)

YEAR

Entirely Collapsed Partially Collapsed

In the early of Taiwan, most of buildings were low wind-resistant and flood-resistant capability. A lot of buildings were destroyed by typhoon or flood event.

1974 Seismic code was introduced into Taiwan building code

87 Flood

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The number of building damaged by Typhoon and flood in 1990 to 2012

4

0

500

1,000

1,500

2,000

2,500

3,00019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

12

Num

ber o

f Bld

g.(H

ouse

hold

)

YEAR

Entirely Collapsed Partially Collapsed

HERB

BILIS TORAJI & NARI

72 Flood & AERE

MORAKOT

In the recent years, the landslide and debris-flow are major factors to cause damage of building during typhoon or flood events in Taiwan.


Typhoon/Flood Insurance in Taiwan

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Typhoon/Flood Insurance in Taiwan

In Taiwan, TY/FL insurance is an Extended Coverage of Fire insurance. The insured has to buy a fire insurance policy and then buy an endorsement of TY/FL insurance to get TY/FL coverage.

The losses induced by landslide or debris-flow (mud-flow) are excluded from TY/FL insurance in Taiwan now.

6

Page:


Total Sum Insured (TSI) of TY/FL Insurance in Taiwan

7

Typhoon Nari (2001)

31 Times (2001 vs. 2012)

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Spatial distribution (Zip code) of TSI –TY/FL Insurance in 2013

8

The most exposure of the typhoon/ flood insurance are concentrated in the western part of Taiwan, especially in the science and heavy industrial parks.

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Gross Written Premium(GWP) of TY/FL Insurance in Taiwan

9

NT$3.2 billion

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Overall Rate of TY/FL Insurance

10

The premium rate of Typhoon/flood insurance in Taiwan was decreased year by year. It’s caused by the vicious competition between the property insurance companies.

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TY/FL Insurance Losses in Taiwan

11

Typhoon Nari (2001) NT$9.3 billion

Typhoon Morakot(2009)


Current Rate Plan of TY/FL Insurance In Taiwan

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Current Rate Plan of TY/FL Insurance

ZONE Insured Target

Base Rate（‰）

Structural Grade

A B C

I Building 0.87 1.31 2.53

Content 1.11 1.68 3.21

II Building 1.05 1.55 3.09

Content 1.42 2.04 4.01

III Building 1.48 2.11 4.13

Content 2.10 2.84 5.54

13

ZONE I II III

Zoning of Typhoon/Flood Insurance

High rate

Low rate

County Level base

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Current Rate Plan of TY/FL Insurance

14

Zoning of Typhoon/Flood Insurance

The zoning of building Wind-

resistant design

It seems that‘WIND’ is a major concern

and not ‘WATER’?

ZONE I II III

Flood Map + Land Use Map

High wind speed design

Low wind speed design

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Current Zoning is Inconsistent With Real Risk

15

Current Zoning of TY/FL Insurance Frequently Flooded Area

Source: Water Resource Agency

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Major Problems of current TY/FL insurance in Taiwan?

The current zoning and premium rate of TY/FL insurance are inconsistent with the real TY/FL risk now. • Based on the experience, not scientific information. • The environment is different.

The county level zoning is too large to discriminate the typhoon/flood risk.

16

Using CAT model to establish a more reasonable rate plan


Catastrophe Risk modeling -TY/FL Risk Model

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The Framework of Catastrophe Risk Model

18

Catastrophe Event Module

Event ID

Annual Occurrence Rate

Event Parameters (Magnitude, …)

#0001 0.00001 …

#.... … …

#9998 0.00020 …

#.... 0.00065 …

Mean of Event Loss

CV of Event Loss

11.2 bn 0.35

…

5.8 bn 0.42

0.5 bn 0.93

Hazard Module

Exposure Module

Location of properties

Event Parameters

Vulnerability Module

Characteristics of Properties

Financial Module Financial Conditions

Hazard Intensity Damage Ratio

Average Annual Loss, Loss Exceeding Probabilities,

Loss scenario….

Event Table Event Loss Table

Event Losses

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Flood risk model

19 Stochastic Events module

Hazard Module

Vulnerability Module

Financial Loss Module

$ Loss

Calculate inundation depth and extent

Calculate Damage Define Rainfall Evens Calculate financial loss

Deductible

Limit

Loss

Deductible

Limit

Loss

Exposure Module Portfolio data

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Wind risk model

Calculate Wind Speed

Calculate Damage Define Event Calculate financial

losses (bldg, content, BI)

$ Loss

Hazard Analysis Stochastic Event Financial Loss Analysis

Vulnerability Analysis

$ Loss

Deductible

Limit

Loss

Deductible

Limit

Loss

Exposure Module Portfolio data

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21

AAL-Average Annual Loss

i ii

AAL Lλ=∑ { }∑ +=i

iLi iCVL λσ )1( 22

Event ID

Annual Occurrence Rate

#0001 0.00001

#....

#9998 0.00020

#.... 0.00065

Mean of Event Loss

CV of Event Loss

11.2 bn 0.35

5.8 bn 0.42

0.5 bn 0.93

iLiλ iLCV


Ratemaking- Using CAT Model

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23

Money IN Money OUT

Loss & Loss Expense

Risk Financing Cost

Operating Expense

Profit

Premium

Post event Assessments

Investment Income

Balance

Concept of “Money In = Money Out” for Rate Plan

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24

Money IN Money OUT

Pure Premium

Loss & Loss

expense

Balance

CAT Model

Projected Portfolio

CAT Model

Portfolio AAL or PML

AALs of different type

of standard risk at different Geo Unit

Projected Portfolio

Ratemaking – Using Catastrophe Risk Model

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The Flow of Catastrophe Ratemaking

25

Define Risk Factor (Building Type、Height、

Built Year…..)

Define basic Territory Level (County, Town,

Village)

Calculate the risk for each type of risk in each basic territory unit by

Cat-Model

Decide the territory based on the risk of each

basic territory (e.g. Natural break, 3

territories)

Calculating Territory Rate

(Consider the weighted AAL of each basic

territory unit )

Forecast portfolio (AAL, PML) by Cat-Model

Balance between

portfolio loss cost and

premium

=> Off Balance Factor

Adjust the rate by Off

Balance Factor

=> Rate plan

Discussion and

Modification

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26

Rate Plan ─ Zone Selecting

Zip 983

Zip 103

Simulate the AAL of each building type (risk unit)in each town (zip)

(1)Zip 100

Rein

forc

ed

Mas

onry

Rein

forc

ed

Conc

rete

Stee

l

Woo

d

Mas

onry

Weighted AALof each town

(4)Zip

County

(2)Weight by the distribution of sum insured

among the towns in the portfolio

Sum Up(3)Masonry

Reinforced Concrete

Steel

Wood

A practical (or projected) insurance portfolio

Divide towns intodifferent zones

Practical Portfolio

Simulated Risk Unit

Zones

Source for dividing zones

(1) Classify by estimated risk distribution (2) Classify by existing hazard maps

Territory of Flood risk Territory of Wind risk

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Decide the Territory of FLOOD Risk

27

Exposure Map- Zip Code Sum Insured

Land-use Map

Flood Maps

The land-use map, flood maps, and exposure map are overlapped to calculate the ratio of area and exposure value prone to the threat of flood . And then classification methodology can be apply to decide the territories of flood risk based on the calculated ratios.

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Decide the Territory of WIND Risk

28

Wind design code-Taiwan Building Code Wind Hazard Map (50 years)

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Rate Plan ─ Rate Computing

Zone 4Zone 3

Zone 2The weighted AAL of each unit in each zone

Zone 1

Rei

nfor

ced

Mas

onry

Rei

nfor

ced

Con

cret

e

Stee

l

Woo

d

Mas

onry

Zip 983Zip 103

The AAL of each unit in each town (Zip)

Zip 100

(5)

(6)

(7) (10)

Rei

nfor

ced

Mas

onry

Rei

nfor

ced

Con

cret

e

Stee

l

Woo

d

Mas

onry

Weight by the distribution of sum insured among the zones in the portfolio

Sum up and multiply by an adjustment factor f

(9)𝐴𝐴𝐴𝐴𝐴𝐴𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 Compute factor f

Multiply by the computed factor f and divide by the total sum insured of the portfolio

The premium rate of unit-zone

The actual (or projected) insurance portfolio

The actual (or projected) insurance portfolio

(8)

Sum up

Compute the weighted AALfor each unit

Compute the zone ratefor each unit

Zone

Premium Rate in Different Building Classes (‰)

Reinforced Masonry

Reinforced Concrete

Steel Wood Masonry

1 0.26 0.34 0.66 0.13 0.97

2 0.63 0.72 1.17 0.36 1.72

3 1.35 1.58 2.38 0.93 3.25

4 3.75 4.81 5.38 2.45 6.87

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Ratemaking Results of a Hypothetical Sample

30

Territory Rate TSI (NT$ billion)

# of Town (Basic territory)

1 0.24 9,680 220

2 1.81 1,820 75

3 4.12 390 51

(for content only)

ALAE=0.03*AAL; Risk Load Factor=0.15 ALAE: Allocated Loss Adjusted Expense

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Conclusions

The zoning of current Typhoon/Flood insurance rate plan is quite inconsistent with the real spatial distribution of Typhoon/flood risk in Taiwan.

A CAT model, which incorporated five modules, i.e. exposure module, event module, hazard module, vulnerability module, and financial module, have been developed to assist to make a more scientific and reasonable rate plan of typhoon/flood insurance in Taiwan.

The concept of financial balance was also used to make the rate plan with financial robustness. The new reference rate plan will be issued in this year in Taiwan.

In the current state, the effect of climate change has not been thoughtfully considered in the model. It should be considered in the future to make the rate plan more reasonable.

31

in taiwan, ty/fl insurance is an - apec typhoon - wenko hsu.pdf · 8 the most exposure of the...

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