Chicago - Attendees at the International Insurance Society 42nd Annual Seminar in Chicago identified natural catastrophes--over pandemics, geopolitical instabilities, terrorism and man-made catastrophes--as the biggest threat to the future of the insurance industry.The question was posed to the more-than-100 attendees of the July 19, 2006 CEO Panel V: Catastrophic Risk and Insurability: Can the industry cope? Edward Liddy, chairman and CEO of Northbrook, Ill.-based Allstate USA and Pierre Ozendo, head of Americas Property & Casualty, Swiss Reinsurance America Corp. USA, Armonk, N.Y., spoke to the attendees on the subject.
Libby addressed Hurricane Katrina and the costs associated with the catastrophe as well as other record-breaking catastrophes. He stated seven of the 10 most expensive U.S. disasters have occurred within the past four years. He proposed a goal to maintain high-quality, highly competitive markets for core home owners product in all states:
- Strengthen first responder capability.
- Improve recovery processes.
- Build and rebuild smarter and stronger.
- Educate citizens about catastrophe dangers.
Ozendo shared his own conclusions regarding natural disasters in the insurance and reinsurance industries:
- The severity of natural cat losses are increasing worldwide. Most of this increase is due to significant growth of insured values in exposed regions.
- The frequency of natural cat events is subject to climate variability. It is important that risk models take this into account.
- The security of reinsurance companies is lower than 10 years ago. Size and degree of diversification matter.
- Capital market solutions can be structured so that the counter party credit risk is extremely small. There is vast market potential for insurance-linked securities given the size of the capital market.
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