Sunday, 2 October 2011

Biggest Insurance claims of past decade - Source (Zurich North America )

Nearly 3,000 people died in the September 11 terrorist attacks in 2001 which destroyed the Twin Towers of the World Trade centre. Insurance companies had to pay out around $40 billion in insured losses. Around a third of this total covered business interruption claims, while other claims included damage to property and vehicles, life insurance, liability insurance, aviation liability and workers compensation.

The 2003 global outbreak of severe acute respiratory syndrome (SARS) started in Guangdong province of China and within weeks spread to 37 countries around the world. There were 8,096 known infected cases of the pneumonia-like disease and 774 confirmed fatalities. Airlines were forced to ground flights to infected areas, businessmen stayed away and in many areas shops, restaurants and hotels were forced to close due to so little business.
U.S. / Canada power outage
The Northeast blackout in 2003 affected an estimated 10 million people in Ontario, Canada and 45 million people in eight U.S. states.Virtually all businesses suffered as a result – flights were grounded, trains were cancelled, traffic lights failed, the internet was down, mobile phone networks broke, factories were forced to shut, restaurants and hotels had to close. Many areas also lost water pressure because pumps didn’t have power.

Indian Ocean earthquake and tsunami
The undersea earthquake in the Indian Ocean on Boxing day 2004 resulted in one of the worst tsunamis in history, killing 227, 898 people. Indonesia was the worst affected area, accounting for around 170,000 deaths. The economic impact of the disaster was also devastating, with countries affected suffering huge losses in the tourism and fishing industries. Insured losses for property were estimated at around $1.3 billion, life and heath at $250 million and travel losses at $50 million.

Hurricanes Katrina, Rita and Wilma
The Atlantic hurricane season in 2005 was the worst in history. There were an estimated 3,865 deaths and record damages of around $130 billion. The economic consequences of the storms were also far reaching, resulting in speculative spikes in the price of crude oil and heavy damage to crops and harvests.

Financial crisis
The collapse of several banks and insurance companies such as Lehman Brothers, Northern Rock and Bear Stearns in 2008 triggered the worst financial crisis since the Great Depression in the 1930s.
Stock markets crashed, the credit crunch happened, businesses around the world went bust, governments were forced to bail out banks, the housing market suffered and unemployment hit an all time high. All and all it has cost the insurance industry billions.

China earthquake
The earthquake that struck China’s Sichuan Province in 2008 was the deadliest earthquake to hit China since 1976 and one of the costliest natural disasters in Chinese history.
It killed around 68,000 people, left at least 4.8 million people homeless and caused an estimated $20 billion worth of damage – most of which was not covered by insurance. Millions of livestock and a significant amount of agriculture were also destroyed.

Swine flu pandemic
The swine flu or H1N1 pandemic has resulted in 18,000 deaths since it began in April 2009 - approximately 4% of the 250,000 to 500,000 annual influenza deaths.
In Mexico, where the outbreak originated, nearly all public services such as schools, theatres and restaurants shut and people would only venture outside wearing a mask.
However, many people have criticised the World Health Organisation (WHO) and the media for exaggerating the danger and spreading panic unnecessarily.


The Icelandic volcanic ash cloud crisis in April this year forced airports in the UK and across Europe to cancel flights for six consecutive days, leaving thousands of passengers stranded overseas.
Disruption to flights then continued for weeks, having a serious impact on businesses and the travel industry, with airlines losing millions of pounds each day.

Floods in Europe and Pakistan
The 2010 Pakistan floods, which began in July, were the worst the country has experienced in decades. It is currently estimated that over 2,000 people have died while millions others have been left homeless and jobless. Meanwhile the floods in central Europe over the summer resulted in at least 37 deaths, while thousands more had to be evacuated. Poland was the worst affected area.

Saturday, 29 May 2010

Aviation Insurance – Major Insurance Covers

  1. Hull "All Risks"
  2. Hull "War Risks"
  3. Liability Insurance

1. Hull "All Risks"

As the name specifies “Hull All Risks” Covers only the physical loss or damage to the aircraft.

General Exclusions.
  • Wear, tear and gradual deterioration
  • Ingestion damage - caused by stones, grit, dust, sand, ice, etc.
  • Mechanical Breakdown

2. Hull War Risks

Since Hull All Risks policies are not covering the War / Terrorism Hull War Risks Policy Covers the following:

• War - this includes civil war and war where there is no formal declaration.
• The detonation of a weapon of war employing nuclear fission or fusion.
• Strikes, riots, civil commotions and labour disturbances.
• Political or terrorist acts.
• Malicious or sabotage acts.
• Confiscation, nationalization, requisition and the like by any government.
• Hi-jacking or any unlawful seizure or exercise of control of the aircraft or crew in flight.

3. Liability Insurance :

Liability can be divided basically into two categories

  • Liability in respect of Passengers, Baggage, Cargo and Mail carried on the aircraft.
  • Aircraft Third Party Liability

Source Courtesy: wikipedia

Normal Landing Mangalore “Table Top” Air port

Air India Boeing 737 Crash ( May 22 - 2010 ) – Some Insurance Facts

  • Primary Insurer - Four private companies consortium led by Reliance General. The other general insurers include Bajaj Allianz, HDFC Ergo and Iffco Tokio.

  • Air India's total loss stands at USD 750 million. Air India can hull entire insurance worth USD 50 million. The entire insurance includes passenger and third party liability.

  • The upcoming renewal of Air India Fleet Insurance is due on September 2010 – this year the rate may raise significantly due to the tragic accident .

Tuesday, 18 May 2010

Offshore drilling platforms

Massive source of premium to the Insurance companies
The premium figures are booming.

Do you think the historic supply and demand curve is the only price fixing factor on this particular sector of business?

I don’t think so-.

There is a high competition among insurance providers
Yes - Pricing is highly depend on the risk probability

Oil rigs in the calm ocean are highly exposed to risk.

Some of the key risk factors:

* Tremendous volume of fuel (Crude)
Massive electromechanical activities which can create      ignitions
Tough accessibility of rescue
Worst ecological impacts

My friend Mr. Ranjith who is working as the Electrical Instrumentation Engineer for Bapco Baharin pointed out that any of the oil rigs are constructed and maintained by state of art technologies. Utmost care is giving to each and every minute activities. Still the risk factor is high - Friction, Electrical Spark, exposure to the burning sun - all these can cause a disaster.

Deepwater Horizon Drilling Rig

which caught fire, burned for two days, then sank in 5,000 ft of water in the Gulf of Mexico

The insurance industry is forecasting a loss of up to $3.5bn (£2.4bn) from the growing oil spill in the Gulf of Mexico. This will be the biggest energy insurance loss in more than 20 years, and could drive up premiums.

Facts and Figures :

- The rig belongs to Transocean, the world’s biggest offshore drilling contractor
- Builder: Hyundai Heavy Industries
- Cost : 350 Million

As per Reinsurers and Lloyd's of London it is the biggest loss in energy market since Piper Alpha ( Oil Rig Fire on July 6, 1988) will trigger rate rises

Ref : Lloyd's London , Wikipedia.