New rules may mean capital hike for storm insurers

LONDON, Oct 25 (BestGrowthStock) – Insurers may need to hold up to
37 billion euros ($51.48 billion) of extra capital under new
solvency rules to cover potential losses from windstorm damage
in Europe, according to loss and exposure aggregator PERILS.

PERILS Chief Executive Luzi Hitz told Reuters on Thursday
that natural catastrophe risk was likely to be a main driver of
capital provisioning under the new regime.

“For non-life insurers in Europe, windstorm is one of the
peak risks they run in their books because of the large
geographical remit a storm can cover,” Hitz said.

European Union insurance watchdog CEIOPS is currently
testing the new rules, which aim to link more accurately the
capital that insurers hold with the risks they face, via its
fifth quantitative impact study, known as QIS5.

There are currently no rules that require insurers to hold a
set amount of capital for a specific catastrophe, said PERILS.

CEIOPS is providing technical advice to the European
Commission as it drafts the Solvency II rules, which are due to
be implemented in 2013.

PERILS said that, under the QIS5 scenario for a huge but
rare storm in Europe — a one in 200 year event — the gross
occurrence-based loss for all nine markets the firms covers
would amount to 36.7 billion euros.

Swiss-based PERILS provides values for industry losses from
natural disasters in Europe that can be used as a basis for
insurance-linked securities (ILS) transactions, similar to the
Property Claims Service data widely used in the United States.

The firm applied the windstorm scenarios of the QIS5 to
Belgium, Denmark, France, Germany, Ireland, Luxembourg, the
Netherlands, Switzerland and the United Kingdon.

“Our motivation is to contribute to the better understanding
and transparency of European catastrophe risk. It is a market
that is evolving in terms of modelling capabilities and data
quality.”

Insurers typically use reinsurance or ILS products such as
catastrophe bonds to transfer their potential from European
windstorms to the capital markets.

Eight firms jointly founded PERILS AG last year to aggregate
European catastrophe insurance data and offer them to third
parties by subscription. They included insurers Allianz
(ALVG.DE: ), AXA (AXAF.PA: ), Groupama and ZFS (ZURN.VX: ), reinsurers
Munich Re (MUVGn.DE: ), PartnerRe Ltd (PRE.N: ) and Swiss Re
(RUKN.VX: ), and reinsurance brokerage specialists Guy Carpenter
(MMC.N: ).

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($1=.7187 Euro)
(Reporting by Sarah Mortimer; Editing by Catherine Evans and
Jon Loades-Carter)

New rules may mean capital hike for storm insurers