[meteorite-list] Insurers Are Now Looking At Some Far-Out Risk Possibilities

From: Ron Baalke <baalke_at_meteoritecentral.com>
Date: Thu Apr 22 09:50:29 2004
Message-ID: <200204251646.JAA15868_at_zagami.jpl.nasa.gov>

http://www.stltoday.com/stltoday/business/stories.nsf/Business/34294740D43F660A86256BA6000AB26E?OpenDocument&Headline=Insurers%20are%20now%20looking%20at%20some%20far-out%20risk%20possibilities%20

Insurers are now looking at some far-out risk possibilities
BY PHILIPP GOELLNER
Bloomberg News
April 24, 2002

ZURICH - What could be worse than the terrorist attacks of
Sept. 11? A meteor falling on a world capital or a tidal
wave flooding the U.S. East Coast, scientists working for
reinsurance companies say.

Swiss Reinsurance Co. and Munich Re are looking for future
calamities that could cost their companies billions of
dollars in claims, or bankrupt them. Their risk experts
monitor science journals and news reports and draw up
mathematical models to put a price tag on potential
tragedies.

A meteorite crashing into Earth could cause many times the
estimated $58 billion in damage from the attacks of Sept.
11, leveling an area the size of three cities and sending
up a huge dust cloud capable of chilling the global
climate for decades, according to Munich Re. In another
scenario, parts from old satellites and rocket stages slam
into Los Angeles or London.

"Before September 11, the public would have considered
these threats too remote to be taken seriously," said
Ernst Rauch, a geophysicist who heads a team of 20
scientists, meteorologists and hydrologists in the global
risk research unit at Munich Re, the world's biggest
reinsurer, "We would have been laughed at."

The purpose of the research is not just to identify
once-outlandish risks. Insurers and reinsurers - which
assume the risk of disaster for insurers - say they need
to review the wording of policies to exclude or limit
coverage for losses from meteors or other previously
unimagined disasters.

"We're now taking a different view on risk," said Marcel
Burge, head of risk engineering services at Zurich-based
Swiss Re, the world's second-biggest reinsurer. "We have
to protect the bottom line."

Traditional worst-case loss scenarios didn't contemplate
teams of terrorists commandeering commercial jets and
crashing them into buildings. The attacks on the World
Trade Center towers and the Pentagon killed more than
3,000 people. The attacks caused the insurance industry's
largest-ever loss.

Because insurers didn't exclude terrorism-related costs as
they do damage caused by war, the Sept. 11 attacks led to
claims against almost all lines of insurance, including
property, life, worker's compensation, business
interruption, accident and health and aviation and space.

Swiss Re posted a loss of about $120 million (200 million
Swiss francs) last year after $1.79 billion in claims from
the attacks of Sept. 11. Munich Re's 2001 profit fell 86
percent partly because of $1.9 billion in attack losses.
Lloyd's of London had a loss of $4.51 billion (3.1 billion
pounds) last year after the terrorist attacks left the
three-centuries old insurance market with its biggest-ever
bill from a disaster.

Reinsurers say they can't afford another terrorist attack.
Many have excluded terrorism-related losses while raising
rates on other lines. Swiss Re, Allianz AG, Zurich
Financial Services AG, XL Capital Ltd. and Hannover Re
said this month they are forming a joint venture to offer
property coverage against terrorist attacks on buildings.

Actuaries rely on historical data to assess the chances of
disasters such as earthquakes, floods, hurricanes and wind
storms. As a result, reinsurers are able to make a profit
by charging more in premiums than they would be required
to pay out under normal risk conditions. The hard part is
defining normal.

Like airborne terrorist attacks on Manhattan, meteorites
that strike the earth are rare. Around 100 tons of dust
and small stones reach the earth's atmosphere every day,
according to a study by Munich Re, and most burn up in the
atmosphere where they can be seen as shooting stars. Only
larger objects with a diameter of several meters reach the
ground intact.

About 100 such strikes were documented in the last
century. A 98-foot meteorite that exploded over the
Tunguska region of Siberia on June 30, 1908, created a
shock wave that felled all trees in an area the size of
Berlin, Moscow and London put together. No deaths were
reported.

Ivo Menzinger, one of 17 specialists studying natural
catastrophe risks at Swiss Re, said the company has been
looking at the possibility of a huge tidal wave spawned by
underwater volcanoes or earthquakes. One scenario
contemplates a large chunk of the Canary Islands breaking
off and triggering a "megatsunami" that reaches Manhattan,
Menzinger said.

Not all reinsurers are devising meteor and tidal wave
scenarios. Lloyd's of London regularly draws up what it
calls "realistic disaster scenarios," such as two large
planes crashing into a big city or a tall building
collapsing, said spokeswoman Sara Chorley.

At Converium Holding AG, the Zurich-based reinsurer spun
off from Zurich Financial in December, actuaries said the
focus should remain on terrorism.

"We might be able to imagine what would happen if Martians
landed on Earth," said Hans-Peter Boller, Converium's
chief actuary. "That's so inconceivable that it's
difficult to quantify. What we try to do is replicate
September 11 in other areas and see what would happen if
it was two or three times worse."
Received on Thu 25 Apr 2002 12:45:59 PM PDT