Institute of Catastrophe Risk Management Protection gap for indirect business interruption presented by Dr. Gordon Woo Institute of Catastrophe Risk Management and RMS 7th August 2018
Concentric Re: 1999 Protection against indirect business interruption from a Tokyo region earthquake Southern Kanto Region Tokyo Institute of Catastrophe Risk Management
Trigger geometry was based on concentric circles around Tokyo Disneyland Tokyo Maihama Yokohama Boso Chiba Peninsula Izu Peninsula 40 0 20 Kilometers Institute of Catastrophe Risk Management
concentric\Moodys Concentric Re: Parametric Bond Principal-at-Risk Notes 100% 100% 100% Issuer: Concentric Ltd. ◼ 78% 85% 93% Security Type 144A ◼ 70% Risk Capital: US $100 million ◼ 88% Maturity: 5 years ◼ 25% Tranches: ◼ Inner Circle Inner Ring Outer Ring 25% 25% Partially Defeased Extendible Units 50% 75% Target Rating [BBB-], LIBOR + 33% 40% 48% 55% 63% 38% 50% 63% 75% Principal Variable Notes Target Rating [BB], LIBOR + 6.5 6.7 6.9 7.1 7.3 7.5 7.7 7.9 Credit Switch Notes JMA Magnitude Issuer: Special Purpose Company ◼ Security Type 144A ◼ Trigger: Physical, based on earthquake magnitude, location and ◼ Risk Capital: ◼ depth Maturity: 5 years (with possible 5 year ◼ Magnitude – Sliding scale based on magnitudes > 6.5 — extension) Location – Three circles (Inner Circle, Middle Ring, Outer Tranches: — ◼ Ring) in the Southern Kanto region of Japan defined by latitude and longitude Depth – shallow earthquakes only, 60km or less — Reporting Agency – Japan Meteorological Agency (JMA) — Development period – [30] days — Institute of Catastrophe Risk Management
Transaction summary • Principal at Risk Notes to provide access to risk transfer capacity for Japanese earthquake risk from the capital markets • Credit Switch Notes to provide access to risk contingent financing from the capital markets for Japanese earthquake risk • First insurance-linked securities transaction sponsored by a non-insurer • Sponsor: Oriental Land Co., Ltd. • Issuer: Concentric Ltd. • Placement Agent: Goldman Sachs & Co. Institute of Catastrophe Risk Management
Institute of Catastrophe Risk Management
Nested zones for parametric indirect business interruption cover Restricted Exclusion Access Peripheral Zone Zone Zone Institute of Catastrophe Risk Management
Florida Zika virus warning zones Wynward Miami-Dade County Institute of Catastrophe Risk Management
The ratio of counterfactual to actual US insurance loss might have been > 5 Institute of Catastrophe Risk Management
Irma near-miss for Disney World After making landfall in Florida early Sunday morning, 10 September 2017, as a Category 4, the center of Irma passed west of Orlando early Monday morning. At that point it had weakened to a Category 1 hurricane, with winds of 85 miles per hour. The park did not lose power, but was hit with high winds and rain. Many trees were downed across its properties Institute of Catastrophe Risk Management and some buildings had water leaks. The Parks reopened on Tuesday, 12 September, 2017.
Collateral economic loss from urban terrorism La Belle Équipe restaurant reopened four months later on 21 March 2016 13 November 2015: Paris restaurant shootings Institute of Catastrophe Risk Management
Euro Disney racked up a net loss of €858m in 2016 as visitor numbers fell 10%, and revenues were down 7%. Institute of Catastrophe Risk Management
Tourism impact of 2015 Paris terrorism • During the first six months of 2016, tourists visits to the Paris region were down by 6.4%, compared with 2015. This amounts to 1 million fewer visitors and a €750 million loss. Tourism contributes 7% to French GDP. • Hotel stays in Paris were down by 11.4% between January and June 2016. For the rest of France, the decline was 8.5% on average. • Notable national tourist declines were 46.2% fewer Japanese; 35% fewer Russians; 27.7% fewer Italians and 19.6% fewer Chinese. Institute of Catastrophe Risk Management
Tourism impact of 2018 Salisbury Novichok attack On 4 March 2018, Sergei and Yulia Skrypal had lunch at the Zizzi restaurant and a drink at the Mill Pub in Salisbury. These premises are still closed. Institute of Catastrophe Risk Management
SARS lethal contagion Source of the 2003 SARS outbreak. Hotel occupancy in Hong Kong was down to 15%. Visitor numbers to Singapore were down 61% in the first half of April 2003, and retail sales were down 50%. Institute of Catastrophe Risk Management
Population flux spreading pandemic influenza contagion Institute of Catastrophe Risk Management
S ickness and absenteeism ABSENTEEISM IN At 20% absenteeism, many businesses cannot WORKFORCE 25% operate and are likely to suspend operations. 20% 15 days above 20% 15% Absent Fear Absent Caring 10% Absent Sick 33 days above 10% 5% 0% 13-1 13-2 13-3 13-4 13-5 13-6 13-7 14-1 14-2 14-3 14-4 14-5 14-6 14-7 15-1 15-2 15-3 15-4 15-5 15-6 15-7 16-1 16-2 16-3 16-4 16-5 16-6 16-7 17-1 17-2 17-3 17-4 17-5 17-6 17-7 18-1 18-2 18-3 18-4 18-5 18-6 18-7 Week Week Week Week Week Week 13 14 15 16 17 18 At absenteeism levels >10%, productivity drops off disproportionately. Institute of Catastrophe Risk Management
Antigenic imprinting in 1918 The peak H1N1 mortality rate at age 28 corresponds to those born at the time of the previous pandemic H3N8 in 1890. Institute of Catastrophe Risk Management
Two famous people who caught the 1918 flu Born 5 December 1901 Born 2 October 1869 Institute of Catastrophe Risk Management
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