Insurance modelling

While China has a long earthquake record, there remain plenty of challenges in properly understanding the country’s hazards. “China is the longest uninterrupted civilisation on earth and they pride themselves in having the longest historical earthquake catalogue. So from that point of view the information is good but on the other hand the information is not publicly available.”Language barriers are part of the problem. “Most of the main publications were written in Mandarin and we therefore have to rely on our Chinese speakers and partner with local organisations to help us build the models and understand the hazard,” says Simic.Another issue is the resolution of the data. Earlier this year, CRESTA [Catastrophe Risk Evaluation and Standardizing Target Accumulations] created new and more specific zones for China, increasing the number of zones from 60 to over 2,400. But this is still a long way from being able to assess risk at a street or zip code level.Primary insurers are becoming more sophisticated in their approach to catastrophes, but the market lacks a unified approach, explains Robert Wiest, Swiss Re’s managing director for China.“Given the relatively short history of insurance in China, market players here have different and sometimes highly different definitions for cat events. For instance, flood, snow storm and typhoon are often defined differently by different insurers, who then have different views on claims.”Wiest thinks recent cat events will help to drive awareness of insurance, as well as improve the industry’s approach to covering catastrophes.“The recent cat events have significantly increased the public awareness for insurance, which is important in driving insurance take up. The events also made the (re)insurance sector to take a further look at how to manage nat cat risks, which will help the industry to take up more risks.“Having said that,” he continues, “one has to be realistic that it will take some time for China to see insurance playing a more important role in taking nat cat risks, as decision-making is not purely from the insurance sector.”