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Insurance exposures vary in each emerging market: SCOR chairman


RIO DE JANIERO—Insurers expanding into new markets should be aware of the often significant differences between the countries they are moving into and not treat them as generic emerging markets, said Denis Kessler, chairman and CEO of Paris-based SCOR S.E.

Closer examination of the exposures insurers face in emerging markets will reveal the differences between the markets and the level of catastrophe risk they are taking on, which often is greater than insurers may think, he said.

“Emerging markets are not clones,” and each market requires a different strategy and approach, Mr. Kessler said during a panel session Monday at the International Insurance Society Seminar in Rio de Janeiro. Different legal systems, different family sizes, different religious beliefs and different attitudes to risk create specific characteristics for each market, he added.

Insurers can often find it difficult to assess the exposures they face in emerging markets because data is not always available and underwriting models usually cover only developed regions, Mr. Kessler said.

An overview of the catastrophe exposures of the so-called BRIC countries—Brazil, Russia, India and China—illustrates the difficulty of assessing natural catastrophe exposures.

Brazil traditionally has been viewed as a country with few catastrophe exposures because it has not been exposed to hurricanes and it is not in an earthquake zone, he said. However, in the past several years, flooding in Brazil has led to significant landslides.

In addition, Tropical Storm Catarina made landfall in Brazil in 2004. While Atlantic hurricanes and tropical storms traditionally occurred in the North Atlantic, climate change may lead to hurricane exposures for the South Atlantic, Mr. Kessler said.


Russia also has been viewed as being largely unexposed to catastrophe risks, he said. But in 2010, it experienced a severe heat wave that had far-reaching consequences—an increase in the death rate during the summer and an outbreak of wildfires. The heat wave also led to lower crop yields, which affected countries that rely on Russia’s cereal production.

“The heat wave in Russia led to a heat wave in the streets of Tunisia,” Mr. Kessler said, referring to the so-called Arab Spring protests and revolts that began in Tunisia at the end of 2010, which were sparked in part by bit increases in the price of food.

In India, the catastrophe exposure has long been recognized, with insurers experiencing 21 catastrophes in India since 1999. But as the Indian economy has grown so rapidly in the past several years, insurers need to be aware that the catastrophe exposure is growing at a similar rate, he said.

In China, again, the catastrophe exposure is large, with four Chinese earthquakes since 1900 being among the most deadly on record, Mr. Kessler said. As the Chinese economy grows, so does the catastrophe exposure and the business interruption exposure. “There are 250 industrial parks in China that are like those affected by the Thai floods,” he said.

For insurance growth to be sustainable, insurers need to invest in training and education and carefully analyze the risks they are exposed to as they expand globally, Mr. Kessler said.

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