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SOUTHAMPTON, Bermuda-Changing demographics in the United States and elsewhere make a $50 billion to $100 billion insured catastrophe loss a possibility, according to a panel of experts.

In order to survive such a colossal loss, insurers and reinsurers must use a full range of up-to-date modeling techniques and scrutinize their reinsurers and retrocessional reinsurers, these experts say.

The main changes affecting catastrophe insurers and reinsurers are demographic, said Scott D. Moore, executive vp and chief financial officer of Partner Reinsurance Co. in Bermuda.

More properties are being built in catastrophe-prone areas, he said at the Bermuda Insurance Symposium III, held Feb. 18-21 in Southampton, Bermuda.

"There's a concentration of values, and more and more people are buying insurance," Mr. Moore said.

As a result of that change in demographics, insurers and reinsurers now must consider how they would handle a catastrophe several times bigger than they have faced before, said Mark E. Fiebrink, senior vp and chief actuary at Nationwide Insurance Cos. in Columbus, Ohio.

Insurers, in particular, could be severely damaged if they do not carefully manage their catastrophe exposures, because they will bear the brunt of the claims, he said.

For example, Nationwide estimates that if a catastrophe exceeded $5 billion, only 20% of the insured loss would be covered by reinsurance, Mr. Fiebrink said.

To adequately cope with "the Big One," insurers should first determine that they have the best available information on their exposures and their potential losses, he said.

"Data quality is absolutely paramount," Mr. Fiebrink said.

To begin with, insurers should use a variety of catastrophe models to try to determine their exposure to a range of catastrophes, Mr. Fiebrink said.

Also, insurers should determine their aggregate exposures in the event of two catastrophes hitting in one year, Mr. Fiebrink said.

"Analyze your wind and quake exposures separately, but you are not done until you have combined them," he said.

Outside of the exposure analysis, insurers should investigate related risks. For example, what effect would a surge in demand for building materials and labor have on the cost of repairing property after a windstorm, Mr. Fiebrink asked.

Also, insurers should consider what would happen to state guarantee funds and their level of contribution to the funds if a significant number of insurers became insolvent after a large catastrophe, he said.

Insurers should also ensure that they have sufficient cash or a line of credit to pay a large volume of claims after a catastrophe, Mr. Fiebrink said.

And insurers should analyze their reinsurers to make sure that they are liquid enough to pay claims quickly, he said.

"Will they have the money to pay you when you pay your claims to policyholders?" Mr. Fiebrink asked.

In fact, insurers should closely examine all aspects of their reinsurance arrangements to ensure that they are well protected in the event of a large catastrophe, he said.

"It's your responsibility to analyze and select who is on your program and for how much," Mr. Fiebrink said.

Insurers should check the ratings of their reinsurers; ask for information on their aggregate exposures; review the quality of their reinsurers' management and the make up of their investment portfolio; and see details of their reinsurers' retrocessional coverage to determine to what extent they are reliant on other reinsurers, he said.

Again, insurers should examine outside events that could affect their reinsurers. For example, how would a stock market correction or a change in interest rates affect a reinsurer's surplus and its ability to pay claims, Mr. Fiebrink asked.

To have an effective and secure reinsurance program, insurers should ensure that they utilize the full range of reinsurance coverage, including self-insurance, traditional reinsurance, finite reinsurance and capital markets products, he said.

The added emphasis on catastrophe protection has changed the role of the reinsurance broker, said Mark T. Hvidsten, chairman and CEO of Minet Re International Ltd. in New York.

"The contemplation of the big one has transformed the role of the broker from a distributor of risk to an adviser on financial exposures," he said.

Brokers are trying to help clients understand the dimensions of their exposures and to determine what risks make economic sense, Mr. Hvidsten said.

Additionally, brokers rely on their broad view of the market to assess the insurance and reinsurance industry's vulnerability to a large loss, he said.

Currently, with the close attention being paid to limiting aggregate exposures, the industry as a whole could probably survive two discrete large catastrophes in one year, Mr. Hvidsten said.

The session was moderated by Henry C.V. Keeling, executive vp and chief underwriting officer of Mid Ocean Reinsurance Co. Ltd. in Bermuda.