Wind/Flood Japan - In search of sustainability
An analysis using different catastrophe models shows that realised reinsurance premiums for non-prop wind/flood (W/F) covers have been lower than the technically adequate premium level. To attain sustainability, reinsurance prices for non-prop W/F covers must increase by 20% – 30% in the forthcoming renewal.
The report substantiates this claim on the basis of three probabilistic loss models, one of which is the Swiss Re curve which adequately reflects actual loss experience and is in line with historical experience during the last 40 years.
All the models indicate that reinsurance protection provided by W/F covers is insufficient to cushion the reinsured from low probability, yet high impact typhoon disasters. Consequently, exit points in W/F reinsurance covers must be increased if a level of protection comparable with that of earthquake exposure is to be attained.
