Over the last 150 years, the Atlantic, the Caribbean and the Pacific have been the scene of major storms and hurricanes.
Experts including Rosa Moran from Claims Swiss Re, and Ricardo Miqueo from Forte UW, addressed the issues relating to the prediction, impact and management of hurricanes in a virtual forum organised by ALSUM recently.
For Latin America, this topic is of great importance due to the devastation and material losses caused each year. In 2020, 47 storms were recorded, of which 18 were hurricanes, and 10 of these reached a higher intensity on the measuring scale.
The key is to measure the risk and prevent it. It is a fact that these weather events will happen and underwriting guidelines must be set.
So, the focus of the insurance business must change. It is important to carry out comprehensive work that includes preparing hurricane plans, mapping ports and marinas and improving the quality of documentation and prevention. This collaborative effort is essential to prevent predictable and actuarially measurable losses, thereby ensuring the sustainability of capacity in disaster zones.
Key underwriting criteria were discussed, including the introduction of specific deductibles, consideration of the geographical location of vessels and clarity of policy clauses. Mapping of ports/marinas and identification of higher risk areas is also important.
PML Cumulus and Calculation Methods
- Maintain an up-to-date database of current risks (seen in the CAT Programme and in the minimum information required).
- This allows calculation of clusters and PML at 100%, at release or at retention.
- The first step is geo-location and marinas.
- Compile a complete list of risks, sums insured exposed with the minimum information required.
- Analysis of impacts of named storms over the last 25 years (minimum).
- Include the percentage of risks affected by area of named storms (calculated up to intensity 3 and greater).
- Analysis of impact by type of vessel and length in feet.
- An adjustment factor will be applied according to the mapping and the criteria for the quality of the hurricane shelter.
- Percentages of estimated loss are incorporated depending on the type of shelter (water or land); this is closely related to the type of vessel, for example, boats should normally be on land, yachts could be in the water unless they have a plan to bring them ashore, so we could say that an estimate of loss of 15% is included on land and 25% in water.
- Currently after Hurricane Otis, loss estimation percentages are being included according to the category of the phenomenon, for example, for hurricanes up to type 3, the estimation of land could work at 15% and water at 25%, for hurricanes type 4 and 5 it could change to land 25% water 37.5%, this would give a total loss per risk/amount covered.