According to a new paper published by Marsh, the scale of the catastrophes experienced in 2011 exceeded previous loss-modelling predictions and has challenged established thinking on the nature of risk. The paper says that, post-2011, companies need to re-examine their risk management strategies and introduce new methodologies to strengthen their operational and financial resilience.
In its paper, Lessons Learned from the Catastrophes of 2011, Marsh identifies five major risk and insurance topics arising from events of 2011, namely denial of access; strike, riot, civil commotion or terrorism; the differences between flood and storm damage; contingent business interruption; and 72-hour insurance notification clauses.
Following the exceptionally severe and prolific catastrophes experienced globally in 2011, organisations now have an opportunity to learn lessons from these events and reduce the adverse impact of future incidents on their balance sheets.
According to Marsh, the catastrophe events of 2011 events have raised concerns around the suitability of standard denial of access cover, which is typically only for short-term incidents. Marsh also highlights the growing importance to businesses of contingent business interruption (CBI) insurance, especially in the wake of supply chain failures following the Japanese earthquake/tsunami and Thailand floods.
Sanjay Kedia, Country Head & CEO, Marsh India Insurance Brokers Pvt Ltd said: “Although the renewal of some reinsurance business in India proved to be challenging, the reinsurance sector continues to function normally and has sufficient capital to support the Asia-Pacific region. Property catastrophe reinsurance rates increased significantly across the region during the April 1 renewal season, largely due to decline in available reinsurance capacity. In addition, reinsurance rates for large catastrophe exposures also firmed.
"In the wake of the losses caused by the Thailand floods to the Indian market, insurers and reinsurers now require more information before writing contingent business interruption insurance. This comes at a time when companies in India are increasingly seeing the need to protect themselves from the effects of natural catastrophes on their supply chains.”
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David Pigot, Chairman of Marsh’s Global Claims Practice, commented: “While the risks associated with the events of 2011 were largely understood, their sheer scale and complexity, combined with the devastation they caused, were unprecedented. These events not only exposed weaknesses in the risk strategies of many organisations worldwide, they also challenged the insurance industry to develop policy wordings that are more responsive to this rapidly evolving risk landscape.
“Organisations need to explore every necessary measure to protect their people, physical assets and balance sheets. By learning the lessons from past events, companies can reduce the likelihood and impact of future losses and minimise their insurance claims.
“While not all damage and economic losses are insured, there has still been a significant insurance and risk management response to the events of 2011. In general, the insurance industry has demonstrated its value and played its role in the process of regeneration for affected clients and communities.”