From October 12 - 14th, the first regional Europa Re Conference on "Developing Catastrophe and Weather Risk Markets in Southeast Europe: From Concept to Reality” took place in Ohrid, FYR of Macedonia. The conference successfully brought together over one hundred participants from every facet of the insurance industry. High-level officials and insurance regulators from Albania, FYR Macedonia, and Serbia, as well as technology providers and private insurance companies attended. Also in attendance were delegates from Moldova, Montenegro, and Bosnia and Herzegovina, as well as donors, such as the World Bank, the Swiss State Secretariat for Economic Affairs (SECO), and the United Nations International Strategy for Disaster Reduction (UNISDR).

The conference was opened by Mr. Stavreski, Minister of Finance and Deputy Prime Minister of FYR Macedonia, who emphasized the importance of the program for the country and stressed his commitment to its success. Over the three day conference, speakers explained the step-by-step process of building catastrophe and weather risk insurance markets in South Eastern Europe. Discussion focused on the various provisions that need to be in place for a successful catastrophe and weather risk insurance market. First, products have to be accessible in both price and availability. Second, products need to be standardized across all member countries and be of the same high quality. Third, buying and selling insurance products, as well as settling claims, must be easy for both the insurance company and the client.

To support these provisions, panelists discussed how Europa Re will offer a hybrid insurance product based on indemnity and parametric modeling. The hybrid product will be based on four parameters of damage – light, medium, severe, and total damage. Aerial photos will be used to determine whether the damage to the property is severe or total. A totally damaged property will be automatically serviced without the need for insurance adjusters. For light and medium damage, loss adjusters will still need to inspect the damage but the pre-established parameters will assist insurance companies in determining payouts.

The conference also covered the three pillars required to support Europa Re’s cutting-edge products – regulations, increased demand, and technology. In regards to the first pillar on regulations, discussion focused on the government’s role in developing policies and a regulatory framework to support a catastrophe and weather risk insurance market. All member states will be required to establish a risk-based regulatory framework for catastrophe and weather risk insurance compliant with EU Solvency II requirements. To assist in risk-based supervision, Europa Re will provide (a) regulatory tools, (b) advisory services, and (c) risk models. The work on regulations will begin in November of 2011.

Regarding the second pillar on building demand, presenters stressed that no country needs to make catastrophe and weather risk insurance compulsory. Instead, a country can increase insurance penetration by creating public awareness and building public confidence in the Europa Re brand of catastrophe products. Beyond public awareness and education, governments must also change their post-disaster funding policies and reduce or eliminate assistance in the absence of an insurance policy.

The last pillar - technology - was the cornerstone of the conference. Speakers explained how a web-based underwriting platform will both sell and settle claims. The web-based platform will enable every provider to access the platform and immediately register all policy holders. The system will be able to provide up-to-the-minute risk management, financial, and cash flow reports, and includes both risk pricing as well as risk modeling capabilities. The platform will be operational in 12-18 months, with models for earthquakes, floods and other perils.

The platform’s risk modeling capabilities is being developed based on risk model on floods and earthquakes that will provide real-time pricing on individual risks in order for insurance agents to generate automatic price policies based on data input. Europa Re will also provide portfolio risk management capabilities for insurers.
With the web-based underwriting platform in place, Europa Re will be able to manage claims for all member states. Aerial photography will provide the automated remote sensing required to support claim settlement services. Based on prior geo-coding, the impacted property will be identified by policy holder number and the damage will be quantified. Expert assessments of aerial photos will be conducted to rate the level of damage. From the web-based system, users will be able to download photos of the property with a damage report. Within a few days of the event, this information will also be downloaded into the claims folder of the policy holder.

After the conference participants provided live demonstrations on both risk modeling and the web-based underwriting platform.

For more information, click below on the presentations from the Conference.

Session I:
Europa Re - Program Overview: Benefits and Opportunities for Main Stakeholders
Introduction to Europa Re Business Model
SEEC CRIF - Program Overview
Europa Re - Benefits and Opportunities: Reactions from the Market

Session II:
Developing Innovative Catastrophe Insurance Products
Innovating in Catastrophe Insurance
Exploring Alternative Product Distribution Channels for Europa Re Products
Exploring the Role of New Technologies in Quantifying Precipitation Levels and Risk of Flood in Urban Areas

Session III:
Role of Technology in Reducing Insurance Costs and Increasing Insurance Penetration for Catastrophe Risk Products
Europa Re's Web-based Underwriting Platform
Flood and Earthquake Risk Models and their Pricing and Risk Management Applications for Europa Re and Participating Insurers
Exploring Remote Sensing Technology in Insurance Claims Settlement

Session IV:
Boosting Demand for Catastrophe Insurance Products: Role of Government Policy
Mortgage Lending and Flood Insurance in Poland
Generating Demand for TCIP Coverage
Making Catatrophe Insurance Compulsory - Pros and Cons

Session V:
Risk-based Supervision for Catastrophe Risk and Related Tools
The Current State of Insurance Regulations and Catastrophe Insurance Markets in Emerging Market Economies
Regulatory Approach to Catastrophe Risk Management in Insurance Companies: Current Challenges and Opportunities
Introducing Risk-based Supervision for Catastrophe Risk in Europa Re Member Countries
Risk-based Supervision for Catastrophe Risk Made Easy - Intro to Europa Re Catastrophe Risk Regulatory Tool

Session VI:
Reinsurance of Weather Risk - Market Perspective
Role of Reinsurers in Weather Risk Underwriting - Temperature and Precipitation Models
Role of Hedge Funds in Providing Reinsurance Capacity for Weather Risk
Financial and Fiscal Instruments for Catastrophe Risk Management

Europa Re's Web-Based Underwriting Platform - Presented by ISI

For media coverage of the Conference, please click on the following articles:
14 October 2011 - Vecer, "Climate Related Catastrophes Will Be Under the Europa Re Wing" (in Macedonian)
14 October 2011 - Dnevnik, "Insurance Against Weather Related Disasters Will Be More Affordable" (in Macedonian)
13 October 2011 - TVM, "http://www.tvm.mk/vesti/ohrid/11470-svetska-banka-finansira-evropa-re" (in Macedonian)
13 October 2011 - OhridNews, "http://daily.mk/makedonija/ohrid-domakjin-na-regionalna-konferencija-za-osiguruvanje" (in Macedonian)