FIGURE 2 By spreading the risk among policy holders, national insurance, global reinsurance and capital markets, even catastrophic events can be insured.


Size of event loss Capital markets


Global reinsurance


National insurance Policy holders


Events:small medium large catastrophic


“ The Chinese government shares the view that insurance pools provide an effective means for dealing with the financial consequences of natural disasters, including earthquakes. The insurance regulators in China have been promoting the establishment of such systems and have invited international re/insurers including Swiss Re to share international experience and detailed suggestions.”


With such a system, risks will be shared among all parties. A compulsory insurance portion will be necessary to get sufficient insurance premium and to avoid adverse selection.


The Chinese government shares the view that insurance pools provide


an effective means for dealing with the financial consequences of natural disasters, including earthquakes. The insurance regulators in China have been promoting the establishment of such systems and have invited international


re/insurers including Swiss Re to share international


experience and detailed suggestions. As a result, Swiss Re has been working closely with the regulators and


other government bodies in China to push for the establishment of such pools. The sooner the pools are set up, the sooner the industry and the society will be able to benefit from them.


DATA AS A KEY CHALLENGE FOR


THE INDUSTRY One key challenge international reinsurers face in China is the quality and transparency of data.


54 | INTELLIGENT INSURER | October 2011 At present, natural catastrophe data are often exchanged in an


aggregated form on administrative, or provincial, basis in China, which is deemed inadequate for proper risk management and accurate modelling.


In the recent years, Swiss Re has co-hosted a number of conferences


and discussions in China with other key players in the market to call for the China insurance industry to adopt a new catastrophe zoning system, known as CRESTA, to improve data transparency.


Given the country’s enormous area and the considerable geographical fragmentation in terms of natural hazard risk exposure, the insurance industry would benefit from adopting more refined exposure reporting zones. This would reduce significantly uncertainty in natural hazard risk assessments.


Improving data quality and transparency is a vital step for the sustainable management of natural catastrophe risk management, especially for managing earthquake risks, in China.


Nicolas Georgy is property and engineering treaty desk head for Greater China and Korea for Swiss Re. For more details, please visit: www.swissre.com


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