Regulation of Catastrophe Risk in Colombia: Country Experience
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Transcript of Regulation of Catastrophe Risk in Colombia: Country Experience
Regulation of Catastrophe Risk in Colombia: Country
Experience
MSc. Jairo Alberto Pérez MuñozDirector of Insurance SupervisionColombian Banking Superintendency
The World Bank, Washington, june 2,3. 2003
PROLOGUEPROLOGUE
Insurance RegulationInsurance Regulation
CatastropheCatastrophe Risk Management
Seismic Plates Afecting Colombia
CARIBBEAN
NAZCASOUTH AMERICAN
COCOS
0 - Maximum probable intensity (MM) < V in 50 years
1 - Maximum probable intensity (MM) < VI in 50 years
2- Maximum probable intensity (MM) < VII in 50 years
3 - Maximum probable intensity (MM) < VIII in 50 years
4 - Maximum probable intensity (MM) < IX in 50 years
Barranquilla
Cartagena
Sta fe de Bogotá
Medellín
Cali
Münchener Earthquake ZonesColombia
Exposure Zones According to Mercali’s ScaleExposure Zones According to Mercali’s Scale
Other Natural Risks Other Natural Risks
Tidal waves Tsunami
Hurricaned winds
Vulcanic eruption
Floods
Slidings and avalanches
REGULATIONREGULATION
Decree 839, 1991:Decree 839, 1991: Deviation Claims Reserve: 40% of Deviation Claims Reserve: 40% of
net retained premiumsnet retained premiums CumulativeCumulative
Decree 2272, 1993Decree 2272, 1993 Probably Maximum Loss 15%Probably Maximum Loss 15%
(under study)(under study)
REGULATIONREGULATION
Coverage offered by insurance Coverage offered by insurance companies covers both earthquake companies covers both earthquake and vulcanic eruptionsand vulcanic eruptions
The fourth bussines line after auto, The fourth bussines line after auto, fire and compulsory autofire and compulsory auto
REGULATIONREGULATION
Reinsurance distribution:Reinsurance distribution:
Retention 40%Retention 40%
This retention is covered by XLCatThis retention is covered by XLCat
At least 15% as PMLAt least 15% as PML
REGULATIONREGULATION
Decree 663, 1993Decree 663, 1993
Compulsory earthquake insurance for:Compulsory earthquake insurance for: Mortgaged loansMortgaged loans Goods received as guaranteeGoods received as guarantee Buildings of entities supervised by Buildings of entities supervised by
the Superintendencythe Superintendency
REGULATIONREGULATION
Decree 2272, 1993Decree 2272, 1993
Insurance companies are requiered Insurance companies are requiered to inform their acumulations, their to inform their acumulations, their reinsurance agreements reinsurance agreements characteristics and their reinsurers characteristics and their reinsurers
REGULATIONREGULATION
Decree 2779, 2001Decree 2779, 2001
Regulates earthquake reserves Regulates earthquake reserves investmentinvestment
Titles issued or backed by foreign Titles issued or backed by foreign entitiesentities
Asigned limits for diversification Asigned limits for diversification purposespurposes
REGULATIONREGULATION
Solvency MarginSolvency Margin Based on fixed factors model, as the Based on fixed factors model, as the
higher between premiums or claims.higher between premiums or claims. No special treatment for earthquakeNo special treatment for earthquake Acceptance of deviation claims Acceptance of deviation claims
reserve as part of admited capital, to reserve as part of admited capital, to be considered as there is not a real be considered as there is not a real obligation against third parties.obligation against third parties.
RISK MANAGEMENTRISK MANAGEMENT
After Popayán earthquake (1983) After Popayán earthquake (1983) and Armero (1985), the National and Armero (1985), the National Goverment creates by means of law Goverment creates by means of law 46, 1998, the National System for 46, 1998, the National System for Attention and Prevention of Disasters Attention and Prevention of Disasters SNPADSNPAD
RISK MANAGEMENTRISK MANAGEMENT
Identification:Identification: There exists risk maps for: There exists risk maps for:
earthquakes, vulcanic eruptions, earthquakes, vulcanic eruptions, tsunamis, erosion, slidings, tsunamis, erosion, slidings, avalanches, floods, hurricanes, avalanches, floods, hurricanes, storms, and in the case of crops for storms, and in the case of crops for frost, hail and othersfrost, hail and others
REGULATIONREGULATION
Oil and energy sectors counts with Oil and energy sectors counts with contingency plans contingency plans
There is no regulation for handling of There is no regulation for handling of radiation sources and for transport of radiation sources and for transport of polluting substancespolluting substances
RISK MANAGEMENTRISK MANAGEMENT
MeasurementMeasurement An incipient processAn incipient process State owned buildings: about 70% State owned buildings: about 70%
insuredinsured Infraestructure: there is not a good Infraestructure: there is not a good
estimationestimation Optimised by means of privatizationOptimised by means of privatization
RISK MANAGEMENTRISK MANAGEMENT
MeasurementMeasurementPrivate sector:Private sector:Mortgaged Loans (more than 700.000), Mortgaged Loans (more than 700.000),
buildings as credits guarantee, buildings as credits guarantee, common areas, buildings belonged common areas, buildings belonged by supervised entities, are required by supervised entities, are required to be insured against earthquake to be insured against earthquake
RISK MANAGEMENTRISK MANAGEMENT
Risk ControlRisk Control
Estructural reinforcement:Estructural reinforcement: Reduce exposure to damage and Reduce exposure to damage and
reduce premiums cost.reduce premiums cost. Hospitals and schools as priorityHospitals and schools as priority Allocation of responsibilities at Allocation of responsibilities at
regional levelregional level
RISK MANAGEMENTRISK MANAGEMENT
Risk ControlRisk Control
Study on “Retention and Study on “Retention and Transference of Seismic Risk”Transference of Seismic Risk”
Self retentionSelf retention SecuritizationSecuritization Catastrophe BondsCatastrophe Bonds
RISK MANAGEMENTRISK MANAGEMENT
Risk ControlRisk Control
Micro zonificationMicro zonification
Studies carried out in the main cities Studies carried out in the main cities used as well as to optimize resources used as well as to optimize resources in emergencies.in emergencies.
ZONA 2
ZONA 5
ZONA 5
ZONA 2ZONA 1
Au to p is ta E l Dora d o
Car
re ra 1
0 0
Ave n id a Ce n ten a ri o
Avenida Ciudad de Cali
Av. Del Congreso Eucarístico
Cal le 6 8
Rio Juan Am a ri llo
Ca lle 80
Ri o Neg r o
Tranv. 23
Av. 19
Av. R od ri go La ra B oni ll a
Rio F ucha
Cota 26
00 m.Lín
ea Férre aAv
.9
Av. 7
Carre
ra 11
Cota 26
00 m.
Av. D
e Los Cerro
s
Av. Carac
as
C all e 45
Av. Ciudad de Quito
Av. C
ircunvalar
Av. L
o s Com
uner os
Av . Ji me nez De Quesada
Co ta 2600 m.
Cota 260
0 m
Calle 50
D Sur
Av. 13
Sur
Rio Tunj ue
lito
Rio Tunj ue li to
X = 1025000 m
X = 1021000 m
X = 1017000 m
X = 1013000 m
X = 1009000 m
X = 1005000 m
X = 1001000 m
X = 997000 m
X = 993000 m
X = 989000 m
X = 985000 m
Y =
985
000
m
Y =
989
000
m
Y =
993
000
m
Y =
997
000
m
Y =
100
1000
m
Y =
100
5000
m
Y =
100
9000
m
Ca lle 44
Sur
Av. 44
Sur
20 S ur
Av. De La s A m er i cas
Av. Boyacá
Av . 9 4
Ca ll e 1 1
Carrera 4
Av. Ferna
ndo Mazuera
Carrera 7
Carrera 6
Call e 2 7 Sur
Au t. A Vil lav i ce nc i o
C al le 48A S ur
Av . B oy ac á
Av. 13
Av. 30
Av. General San
tander
Aut . D el S ur
Av . 1o. De M ay o
Av. C
iudad d
e Villavicencio
Di ag . 43 S
u r
Carrera 86
Av. Acoberto Mejia
Rio Bogotá
Cal le 2 2
Av. Luis Car los Galan Tra
ns. 85
Av. La Constitucuón
Carrera 66A
Av. 68
Av . 7 8
Cañ o
Carrera 38
Av. 10 0
Av. P epe S ie rr a
C*
B*
A*G*
H*
F*
Cal le 13 8
Av. S
uba
Av. 147
Cal le 142
Carrera 22Cal le 140 Carre
ra 19
Ca l le 134
Cal le 88
Carrera 9Call e 80
Av. Ch i le
Ramal Oriental
Ramal Occidental
Diag. 36 Sur
R io B ogot á
Carrera 13
Can
a l Có rd
oba
Rio Bogotá
Línea Férrea
Cota
2600 m
.
Cota 2600 m.
Calle
Cota 2600 m.
Cot a 26 00 m .
Cota 26
00 m.
Cota 2600 m
Rio
Tunjue
lito
T unj uel itoRi o
Av. CaracasAv. 10
Diag . 26 Sur
Cal le 4 4 Sur
Cal le 6
Av . 1o. D e Ma yo
Carre
ra 68
Av. B
oyacá
Transv. 47
Carrera 7
Av. Ciudad de Q
uito
Carrera 50
Cal le 5 3
C all e 63
Di ag . 53
Call e 68
Cal le 72
Ca ño de L os C omune ro s
Ca na l de S a
n Cri sto b al
Cana
l de R
io Se c o
Rio Fucha
Canal Boyacá
Ca lle 31
Cal le 3 9
Ri o Bog otá
Call e 59 A
Ri o B ogot á
Rio
Bog o
tá
Rio Bogotá
Rio Bogotá
Cal le 1 61A
Cal le 1 70
Av. Sa n José
Aut. Pase
o de Los LIbe
rtadores
Carretera
Cen tra l de
l Norte
Carre
ra 15
Can a l de Los M oli nos
Cal le 1 27
26 0 0 m
.
260
0 m
.
E*
D*
Can al Có rd oba
Tr an
s vers
al 9 1
N
EW
S
BOGOTASEISMICMICRO – ZONES MAP
RISK MANAGEMENTRISK MANAGEMENT
Monitoring:Monitoring:
A committee was established to A committee was established to monitor by means of performance monitor by means of performance indicators and a schedule of indicators and a schedule of activitiesactivities
RISK MANAGEMENTRISK MANAGEMENT