Recent floods in major cities around Southeast Asia and other parts of the world have reopened the conversation on flood coverage in insurance products and the means by which they will be financed. In just the past year, Malaysia, Pakistan and South Korea have all witnessed the worst floods to hit their shores in decades. Economic losses from such floods have grown steadily, with losses estimated to increase drastically in the future due to increased urbanization, climate change and poor flood prevention measures. As it stands, it is estimated that only 18% of all economic losses1 from floods in the past decade were insured. The recent flood in Kuala Lumpur had only 36% of the total economic losses insured.2 With the lack of flood coverage in fire, motor, business interruption and crop insurances, these costs will either be borne by the government or the affected societies themselves, raising the question of why flood coverage is so severely underinsured despite the emerging threat. Why is there underinsurance? The most apparent problem is the consumers’ lack of awareness of possible increasing flood risks. Flood coverage benefits are often understated among consumers who have not yet been threatened with flood losses. Insurance practitioners we interviewed indicated that this is prevalent amongst commercial property owners who generally opt out of the flood add-on cover to reduce their insurance expenses. Residential properties, except those protected by an all-risk cover required by their financing, are generally uninsured as well. In Malaysia’s case, the awareness for flood cover among vehicle owners had just started to increase in the aftermath of the 2021 floods. Beyond a lack of awareness, there have also been complaints from policyholders that the coverage for floods is often confusing to understand, especially for commercial cover. Flood cover could also be tedious to underwrite, such as in the case of flood cover for business interruption where a projection of estimated financial statements might be required by insurers to offer coverage. As such, many enterprises choose to remain uninsured despite the significant financial risks; commercial losses, in particular consequential losses, contribute the majority of uninsured losses. The second reason for flood underinsurance is the high cost of cover. Once affected by flood, a location or region could be identified as being vulnerable and susceptible to future floods, causing premiums to increase for policies based in the area. In such cases of flood-prone areas, insurers rely on passing the exceptionally large flood losses to reinsurers in the event of catastrophes, helping them to control their claim costs. However, after a catastrophe event reinsurers themselves are forced to increase their premium, an additional cost which will be passed on to policyholders residing in flood-prone areas eventually. Flood policy premiums in Thailand had more than doubled3 in the aftermath of the 2011 floods, which subsequently required government intervention. Without proper investments into flood mitigation systems, these areas could be subjected to increasing premiums and dwindling demand for flood cover. Flood risks are also notoriously complex to model for insurers such as estimating the severity of damage and losses arising from floods. The range of risk factors, such as urbanization, climate change and inadequate infrastructure against flooding, continues to expand and evolve, which requires any models used to be sufficiently dynamic to capture the changing environment. Insurers are also required to improve on any existing data collection on flood exposure. A lack of data and inadequate models causes a lack of conviction in the rates produced and additional margins built into the estimates leading to unnecessarily high premiums. Solutions: Not without their own challenges Each country has attempted to solve the causes of underinsurance in its own way, involving a mix of innovative and interventionist solutions, albeit with their own shortcomings. One approach would be for governments to enforce mandatory flood coverage for properties, motor and crops. This will reduce the risk of anti-selection and allow the loss from floods to be spread over more policies. Mandatory cover would also ensure that insurers are able to gather adequate amounts of data gradually to help them price risks with more credibility. This should work to reduce the level of prudence embedded into the flood insurance premium rates. On the flipside, increased granularity and credibility in pricing could lead to greater differentiation in premium rates for homes in flood-prone areas. Furthermore, it is not straightforward, as governments will be concerned about such measures being politically unpopular. Parametric insurance has been gaining traction as the ”go-to” solution for affordable flood cover. A fixed payment in the event a prespecified parameter exceeds a predetermined threshold presents more certainty to the insurers on the scale of losses as compared to insurance written on an indemnity basis, allowing premiums to be more affordable. However, the need for precise measuring equipment and the possibility of the fixed claim payment being insufficient to cover the losses incurred prevent parametric insurance from being a comprehensive solution. Insurers also tend to be wary of possible cash flow issues from needing to settle large numbers of claims in a short period of time as payment is guaranteed once the event has been triggered. Certain parameters, for example amount of rainfall, might also go by an average measure within a specified postcode, ignoring the possibility of very different landscapes within each postcode if the area of coverage is large. Regulators are increasingly requiring insurers to model possible climate stress scenarios, which often involves modelling losses arising specifically from floods. Although insurers are still struggling at this stage to accurately quantify the impact of climate change over the long-term projection horizon, this encourages insurers to be aware of climate-related risks and develop internal models to estimate flood-related losses. Eventually, this could lead to greater emphasis on risk mitigation and pricing flood losses more reliably. However, flood-prone risks will continue to face high and increasing premiums in the future without active flood management measures. To make matters worse, we may see more and more flood-prone areas emerge with increased urbanization and climate change. What about the flood-prone risks? It seems inevitable that intervention would be required to ensure flood-prone risks are insured. We explore three unique solutions currently being implemented in three different parts of the world. Flood Re was founded in the United Kingdom at a time when insurers refused to provide flood cover for high-risk properties as flood reinsurance was costly.4 It is effectively an industry pool providing reinsurance cover against large losses or large aggregate losses, funded by levies on all home insurance policies on top of a premium imposed on policies included in the scheme. The drawback is that Flood Re might become an unsustainable solution if flood losses continue to rise. Without a gradual improvement in flood risk management, Flood Re will not be able to maintain its current premium structure, with any increases in its premiums likely to be passed down to the policyholders. Flood Re is also only available for residential properties built before 2009, with commercial properties (with a more heterogeneous risk profile) being excluded. Although this was to encourage developers to avoid flood-prone areas in future developments, this has not proved to be effective in reducing new developments with high flood risks. National Flood Insurance Programme (NFIP) in the US is a flood insurance programme offered directly by the government to those from high-risk or special flood hazard areas (SFHAs).5 In order for homeowners or small businesses to be able to purchase cover, their local communities will be required to implement floodplain management standards to control flood losses. However, the premium rates implemented in the past have proven to be insufficient, resulting in the NFIP being debt-ridden and requiring bailouts by the federal government. In light of this, the regulation enabling NFIP was amended to allow NFIP to secure reinsurance from private reinsurance and capital markets besides introducing Risk Rating 2.0 to incorporate more dynamic factors such as flood frequency and distance from water source into their pricing engine. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) acts as a multi-country risk pool.6 Although not specific to flood losses, the concept could be emulated between neighboring countries facing similar levels of flood threat. Acting as a pooling facility between member countries, the CCRIF offers parametric insurance for perils occurring in the Caribbean, such as catastrophic tropical cyclones, earthquakes and excess rainfall events, with pre-agreed payments made to member countries once a certain parameter threshold, such a flood level, is breached. Being a parametric insurance allows the CCRIF to provide natural catastrophe coverage at prices below non-pooled arrangements. The cover provides short-term liquidity to any affected members when the policy conditions are triggered but the inherent weaknesses of parametric insurance discussed above are present within the CCRIF as well. The way forward Every jurisdiction will require its own unique solution, which may take the form of preventive measures, damage control protocols in the event of flooding and financing mechanisms to help flood-prone areas deal with the economic consequences of flooding. It will therefore require all stakeholders to come together and contribute towards a sustainable solution. However, we believe insurance provides a platform for scrutinizing the issues facing the flood-prone communities, i.e., the increasing frequency and intensity of floods, flood management infrastructure and the financial losses (insured and uninsured), and crystallizing them into a risk score which translates to the premium rate. If flood insurance remains unaffordable despite concerted efforts to mitigate the impact of floods, measuring financing and spreading the risk and cost of floods, then perhaps it is time to question the location of those homes and businesses. We believe the insurance industry is best positioned to lead the stakeholders in discussion. 1 Clifford, C. (1 September 2022). Flood losses to insured property are jumping drastically and only a small fraction of what’s damaged by floods is insured. CNBC. Retrieved 27 September 2022 from https://www.cnbc.com/2022/09/01/swiss-re-flood-losses-covered-by-insurance-are-rising-drastically.html. 2 Ong, S. (30 March 2022). BNM: December 2021 floods highlight significant underinsurance of flood risks. The Edge Markets. Retrieved 27 September 2022 from https://www.theedgemarkets.com/article/bnm-december-2021-floods-highlight-significant-underinsurance-flood-risks. 3 A.M. Best (9 February 2012). Flood Losses Prompt Key Changes in Thai Insurance Industry. Best’s Briefing. Retrieved 27 September 2022 from https://www.ambest.com/press/021001thaifloodbriefing.pdf. 4 Flood Re. What Is Flood Re? Retrieved 27 September 2022 from https://www.floodre.co.uk/about-us/. 5 Metz, J. (17 May 2022). How Does The National Flood Insurance Program Work. Forbes. Retrieved 27 September 2022 from https://www.forbes.com/advisor/homeowners-insurance/national-flood-insurance-program/. 6 See the CCRIF website at https://www.ccrif.org/. Source: milliman.com

Leaders from the Philippine Insurers and Reinsurers Association (PIRA) and the Philippine Life Insurance Association (PLIA) pose with Insurance Commissioner Dennis Funa at the ShangriLa Bangkok where the 2022 ASEAN Insurance Council Meetings are being held. Among these leaders are (from left) PIRA Chairman Butch Rosario, IIAP Executive Director Francis Papa, PIRA Trustee Art Reyes, National Re President and former PIRA Chairman Allan Santos, PIRA Executive Director Michael Rellosa and PLIA President Rico Bautista. This is the first AIC Meeting to be held face-to-face since 2020 when the Covid-19 pandemic hit. A series of AIC committee meetings will be held the entire week side by side the meetings of the ASEAN Insurance Regulators where Commissioner Funa is attending.

The country's insurance experts pushed for insurance literacy programs and raffled off insurance products during the five-day 2022 Financial Education (FinEd) Virtual Expo organized by the Bangko Sentral ng Pilipinas. The Philippine Insurers and Reinsurers Association (PIRA), in partnership with the Insurance Institute for Asia and the Pacific (IIAP) and Alliedbankers Insurance Corporation, actively promoted insurance education programs through their booth at the FinEd Expo. It was the fifth time since 2018 that PIRA and IIAP partnered in the FinEd Expo, which serves as the highlight of the National Economic and Financial Literacy Week as designated under Republic Act No. 10922 Through their virtual booth, PIRA and IIAP promoted the importance of studying insurance. PIRA Executive Director Mr. Michael Rellosa thanked the BSP for another opportunity to promote insurance literacy among Filipinos. "We are honored to be part of this event, the biggest event in financial education in the country every year," he said. For his part, IIAP Executive Director Mr. Francis Papa praised the BSP for continually pushing for the country's financial education agenda despite the limitations and challenges from the Covid-19 pandemic. "With the BSP showing us the way, we are energized in our collective efforts to promote insurance literacy as an important component of financial education," he said. Among the things PIRA and IIAP highlighted in their booth were the PIRA Campus Tour, the SUITS Scholarship Program, and the Thesis Sponsorship. The Campus Tour is PIRA's way of reaching out to students by visiting them in their schools and giving them ideas on the exciting careers available in the insurance industry. The SUITS Scholarship Program is an intensive Management Training Course provided by the IIAP to new graduates to fast-track their entry to the industry. The graduates from this program are hired immediately by companies under PIRA and the Philippine Life Insurance Association (PLIA) as young managers. The Thesis Sponsorship, meanwhile, is financial support offered by PIRA to students and thesis advisers who are doing research related to insurance. The PIRA-IIAP Booth attracted thousands of visitors from all over the country who downloaded brochures about the said programs. Some even sent emails expressing their interest. Meanwhile, Alliedbankers Insurance Corporation, a member of PIRA, generously donated 25 raffle prizes comprised of eight Personal Accident insurance, eight residential Fire insurance, eight Travel insurance, and a Motor Car insurance for up to P20,000 in premium and taxes. The said prizes were raffled off every day for five days, with Alliedbankers and PIRA being acknowledged by the emcee. The event was a huge success and was viewed by financial educators and students, as well as employees from the government and the private sector nationwide. Ms. Rizza Reyes, head of Bankassurance Marketing and Sales of Alliedbankers, congratulated the winners who all received electronic certificates of insurance coverage. Recordings of the event are available through the Facebook pages of the Bangko Sentral ng Pilipinas and PisoLit.

More foreign companies are likely to enter the insurance market in the Philippines as the deadline looms for the final tranche of required capital increases -- a move that would impact small local insurers. The Philippine Insurers and Reinsurers Association (PIRA), the umbrella organization representing the interests of the non-life insurance industry in the country, said a number of foreign firms had expressed interest in entering the Philippines, reported The Philippine Star. “We were approached by Koreans for M&As. They represent Koreans, Thai, and Japanese capital,” PIRA executive director Michael Rellosa told The Star. Under the Insurance Code, existing insurers must have a net worth of at least PHP1.3bn ($23.3m) by 31 December this year from the current required minimum level of PHP900m. Unfortunately, not all insurers will be able to comply with the PHP1.3bn requirement, especially as the COVID-19 pandemic trimmed the net worth of insurance companies in the past two years. A new insurance code was signed into law in the Philippines in 2013 under which capital requirements for insurers were increased every three years until 2022. The required net worth was PHP250m in 2013, PHP550m in 2016, PHP900m in 2019, and PHP1.3bn in 2022. Mr. Rellosa said the number of PIRA’s members is down to 56 at present from 130 and this could be slashed further to around 40 by next year. Source: asiainsurancereview.com

Fast-melting glaciers are releasing staggering amounts of unknown bacteria into rivers and streams, which could transform icy ecosystems according to new research. In a study of glacial runoff from 10 sites across the northern hemisphere, researchers have estimated that continued global warming over the next 80 years could release hundreds of thousands of tonnes of bacteria into environments downstream of receding glaciers. Aberystwyth University microbiologist and author of the study Arwyn Edwards told the BBC, "We think of glaciers as a huge store of frozen water but the most important lesson from this research is that they are also ecosystems in their own right.” Dr. Edwards said studying the contents of glaciers is like opening the door to another time in history. Microbes entombed inside them could be a rich source of useful, new compounds, such as antibiotics. The researchers involved in the new study said melting glaciers are releasing tonnes upon tonnes of bacteria faster than scientists can possibly catalogue them. Finding on average tens of thousands of microbes in each millilitre of water, they estimate that more than a hundred thousand tonnes of bacteria could be expelled into glacial meltwaters over the next 80 years, not including the glaciers in the Himalaya Hindu Kush region of Asia. Source: asiainsurancereview.com

The cyber threat landscape has reached a new level of commercialization and convenience for would-be attackers, with nearly all barriers to entry for committing cyber crime removed through the expansion of cyber crime-as-a-service according to Sophos' 2023 Threat Report. The report details how ransomware remains one of the greatest cyber crime threats to organizations with operators innovating their extortion tactics, as well as how demand for stolen credentials continues to grow. Criminal underground marketplaces like Genesis have long made it possible to buy malware and malware deployment services (malware-as-a-service), as well as to sell stolen credentials and other data in bulk. Sophos principal threat researcher Sean Gallagher said, “This isn’t just the usual fare, such as malware, scamming and phishing kits for sale. Higher rung cyber criminals are now selling tools and capabilities that once were solely in the hands of some of the most sophisticated attackers as services to other actors. “The commoditization of nearly every component of cyber crime is impacting the threat landscape and opening up opportunities for any type of attacker with any type of skill level.” With the expansion of the as-a-service economy, underground cyber criminal marketplaces are also becoming increasingly commodified and are operating like mainstream businesses. Cyber crime sellers are not just advertising their services but are also listing job offers to recruit attackers with distinct skills. Some marketplaces now have dedicated help-wanted pages and recruiting staff, while job seekers are posting summaries of their skills and qualifications. Indeed, as the cyber crime infrastructure has expanded, ransomware has remained highly popular—and highly profitable. Source: asiainsurancereview.com

A majority of organizations (80%) have had to use their cyber insurance and more than 50% have used it more than once according to a new analysis by Delinea. The new analysis Cyber Insurance – If You Get It, Be Ready to Use It reveals that insurers are pulling back on covering what is most needed, with only about 30% of organizations saying their policy covers critical risks including ransomware, ransom negotiation, and decision on ransom payment. The survey, conducted among 300 US-based IT decision makers by Censuswide, found that nearly 70% of organizations have applied for cyber insurance, with 93% being approved when they applied, and 65% claiming the process took less than three months. While risk reduction is the main reason for applying (40%), one-third (33%) of respondents claimed that it was also due to requirements from executive management and boards of directors, and 25% cited recent ransomware incidents as a primary decision driver. Given the pressure coming from the top, it’s therefore no surprise that 93% received the budget required to purchase their cyber insurance policies even as 75% of respondents said premiums increased in their last renewal. Delinea CEO Art Gilliland said, “Executives and boards use cyber insurance to lower the costs associated with potential breaches. As a result, most organizations are scrambling to buy or renew a policy, even as the insurers pull back on what they will cover and simultaneously raise the price of coverage.” The analysis found that insurers are increasingly requiring organizations to implement a broader set of security controls to try to reduce the number of customers leveraging their policies. With 80% of companies leveraging their insurance policies, it is expected that more advanced solutions are needed. Other main reasons cited for applying for cyber insurance were business contract requirements (24%) and recent data breaches (17%). The largest number of respondents (48%) indicated that their policy covers data recovery, while roughly a third indicated it covers incident response, regulatory fines and third-party damages. To qualify for cyber insurance, a majority of respondents (51%) confirmed that cyber security awareness training was a requirement, with just under half (47%) stating they were required to have malware protection, antivirus software, multi-factor authentication (MFA), and backup data. Source: asiainsurancereview.com

Regional InsurTech Igloo yesterday announced that it had successfully raised an additional $27m in its Series B extension, bringing a close to its Series B funding round at $46m. The initial Series B capital raise of US$19m in March this year was led by Cathay Innovation, with further investments from ACA and other existing investors including OpenSpace. This round of investment comprised a consortium of impact investors including BlueOrchard, Women’s World Banking Asset Management (WAM) and Finnfund. The InsuResilience Investment Fund II, initiated by German development bank KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and managed by impact investor BlueOrchard Finance Ltd., led the capital extension, along with WAM, Finnfund, La Maison, and Series B lead investor, Cathay Innovation. To date, Igloo has been on a strong growth trajectory having cemented partnerships with over 55 companies across seven countries and over 15 products in its expanding product suite. It has facilitated over 300 million policies and increased gross written premiums by 30 times since 2019. Since its inception, Igloo has been making insurance accessible and affordable through data and technology in Southeast Asia and is the only InsurTech in the region with all major economies contributing to its performance. Igloo has championed financial inclusion for underserved communities across the region to help build a more sustainable future in line with the United Nations’ Sustainable Development Goals (UN SDGs). It has been at the forefront of addressing underinsurance for gig economy segments by providing comprehensive and competitively-priced insurance for delivery riders, through its Foodpanda partnerships in Thailand, Singapore, and the Philippines, as well as Lozi and Ahamove in Vietnam. Just recently, Igloo launched its first parametric Weather Index Insurance product in Vietnam - one of the top five rice exporting countries. Utilizing blockchain-based smart contracts the product automates claims payouts calculated using pre-assigned values for losses due to weather events or natural calamities - alleviating the loss of yield and livelihoods that paddy farmers face during adverse weather events. It is Vietnam’s first parametric insurance and the company’s first integration of smart contracts into insurance. The additional funds provide Igloo with a comfortable multi-year runway. With 50% of Igloo’s team committed to research & development, the company plans to double down on attracting the best engineering, product, design and data talent across all geographies. Igloo is also in the process of identifying and closing on various M&A opportunities to help it move swiftly towards its vision for ‘Insurance for All’. Mr. Raunak Mehta, co-founder and CEO of Igloo, said, “The support from our investors underlines the value of our technology proposition in making insurance accessible and affordable for the underserved communities, especially gig economy workers and MSMEs. As a leading InSurTech firm in Southeast Asia, building sustainable ecosystems is a prerequisite for us. We are now well positioned to leverage our expertise and accelerate our growth across the region and further strengthen our products and services portfolio that addresses the traditional insurance gaps.” Igloo is the first full-stack InsurTech firm to emerge from Singapore. It has offices in Singapore, Indonesia, Thailand, The Philippines, Vietnam and Malaysia and tech centres in China and India. With a mission of making insurance accessible for all, the firm leverages big data, real-time risk assessment, and end-to-end automated claims management to create B2B2C insurance solutions for platform companies and insurance companies. Source: asiainsurancereview.com

By Herminia S. Jacinto ALMOST three years after the first lockdown was announced, we like to think that things are back to normal. Schools are now conducting face-to-face classes and may soon discontinue the hybrid and online methods. Business is back with a vengeance. A new phrase has been coined — revenge spending! Restaurants and vacation places are operating at full capacity and sometimes have to turn away patrons to keep to social distancing norms. Malls are fully decorated and will be open until 11 p.m. during the holiday season. It will be a Merry Christmas for everybody! Wearing of masks is now optional even inside buildings except for some, like seniors and those with comorbidities. In addition to the pandemic, there were the typhoons and floods, the strong earthquake in the northern provinces that caused a lot of damage to property and even lives. We are now looking forward to a period of recovery and prosperity. Much is expected from the new government which seems to have the right intentions although plagued with the usual birth pains. These events should have reminded us to always be prepared for such eventualities. The pandemic was totally unexpected, so we had to start from the ground in coping with it. It took some time to diagnose it correctly and develop the vaccines and correct medication to treat those afflicted with Covid. But typhoons and floods are regular events in our country. So by now, we should have installed the procedures needed in handling the aftermath of these events. Predictions for earthquakes have been regularly issued by experts and indeed, several have occurred already during the three-year period of the pandemic. How do we protect ourselves from these catastrophic events in addition to the relief operations that normally happen after they occur? This is the time to review what protection we have for ourselves and for our investments in properties like our homes, businesses and motor vehicles. As we reinforce our residences to weather a strong typhoon, we should also update the insurance cover for them. Are you protected for the natural perils like typhoons, floods and earthquakes, in addition to fire and lightning risks? Have you reviewed the amount of insurance cover that you have as a result of improvements to the property and normal inflation? Your insurance company or insurance agent can do that easily for you. We have seen in the last typhoon "Karding" that water came so fast people had no time to bring their appliances and vehicles to higher and safer places. Cars were seen floating and filled with water for about a day, which was long enough to render them beyond repair. Did you include a cover for "acts of nature" for your beloved SUV? I have always told my friends that if one can afford to buy an expensive car, one can definitely afford to pay for the extended cover of insurance! And what about you and your family? This is the time to review life insurance protection for everyone. Those connected with companies which provide medical and hospitalization benefits for their employees are lucky because they have that protection. But what about their families? Are they included in the benefit or should the employee purchase additional cover for them? The insurance industry, life and nonlife, has paid over P20 billion of Covid-related claims. The response from the industry was fast and efficient. Now is the time to talk to your favorite insurance agent or financial advisor. The insurance industry was quick in making adjustments in its operations so they could provide the same efficient service to their clients. These adjustments have become part of their operating systems which allow them to provide cover or pay claims online. As operations return to normal and employees return to their places of work, client servicing has become even more efficient. Indeed, your insurance industry is back to normal! I just hope that they will think of medical insurance covers for senior citizens who are most vulnerable to illness and accidents. This column is a gentle reminder to everyone to include the updating or purchase of insurance protection in your list of "revenge spending" this year and the years to come! Source: manilatimes.net