Natural catastrophes on the rise

Over the past decades, China's populated areas have become increasingly affected by natural disasters such as typhoons, floods, droughts, storm surges and hailstorms. Direct estimated economic losses from the 2008 ice storm disaster amounted to USD 20 billion. By contrast, the insurance claims for this disaster amounted to only 3.4% of its direct economic loss.

Over a decade after these ice storms, floods in Henan province further exposed the need for better insurance coverage against natural disasters. While the total economic damage for these floods reached USD 30 billion, insurance claims amounted to only about 7% of this loss.

“The gap between economic and insured losses is still sizable here and underpins huge potential demand for catastrophe insurance protection“, says Wenwen Ying, Nat Cat Specialist and Senior Property Treaty Underwriter in China. “The government has been encouraging insurers to provide risk transfer solutions.“ Since Wenwen joined Swiss Re in 2017, she has been looking into new solutions for clients, together with our cross-functional teams.

“Cat in a Box”

Since the early 2010s, Swiss Re’s team in China has worked closely with local stakeholders to build innovative parametric insurance products. “Parametric insurance had been a resource to shorten the payout time from months to a few days. But the underwriting processes remained complicated“, says Vipin K S, Senior Solutions Manager, P&C Solutions.

To increase the efficiency of underwriting parametric insurance for natural catastrophes, Swiss Re’s team came up with a solution they dubbed “Cat in a Box“. The solution is affectionally named after the well-known method it is based on.

Those using the tool highlight an area on a map (a “box“) and automatically gain historical information on natural catastrophe events that have impacted the area. Taking regional differences into consideration, the tool then provides customised information after a few clicks. It calculates the probability of these events happening in that area in a designated future time span, based on Swiss Re’s proprietary natural catastrophe models. "We created a tool to help users design a sophisticated end-to-end parametric product within half an hour", notes Vipin.

Partnering with Ping An

In 2021, Swiss Re brought “Cat in a Box” to one of the leading insurers in China, Ping An, so they could work together to promote the use of innovative parametric-based products.

“The collaboration between Ping An and Swiss Re is very constructive. Swiss Re’s catastrophe models and data on natural disasters have enabled tailor-made product design and better user experience for our customers”, says Joe Liang, Executive Member and Director of Commercial Insurance of Ping An P&C.

Wenwen, together with Shuzhan Wang, who works in Swiss Re’s Ping An account team, have travelled throughout China to understand how natural catastrophe insurance can help improve the resilience of local communities. “This work has the potential to benefit hundreds of millions of people across the country“, says Wenwen. “We look forward to making an impact.“