A global reinsurer has developed a world-first model that enables insurers to quantify volcanic risks and calculate expected losses from volcanic eruptions.
The new global volcano model, developed by
Swiss Re, assesses risk posed by over 500 active volcanoes, enabling insurers to design coverage against severe loss potential of volcanic eruptions.
In a statement, the global reinsurer said quantifying volcanic risks can help cities and countries prepare for volcanic disasters, especially as one in seven of the world’s largest urban areas are located within a 150km radius of an active volcano.
The volcano model found that the 10 most exposed cities include: Tokyo, Naples, Manila, Managua, and Jakarta.
Swiss Re said the new model enables the insurance market to assess and price volcanic risks with precision - crucial because volcanic threats constitute a substantial part of the insurable risks in some countries.
Want the latest insurance industry news first? Sign up for our completely free newsletter service now.
“As global urbanisation gathers pace, the protection gap for volcanic hazards widens,” said Jayne Plunkett, CEO reinsurance Asia at Swiss Re. “But economic disruption and large-scale economic losses for people and businesses locally are only one part of the picture. For example, in the case of any large scale eruption, supply chains would be affected all around the world, causing both economic and insured losses.”
Volcanic eruptions are currently largely uninsured, except in Iceland where there is compulsory volcano insurance, creating a huge protection gap. By allowing for a precise quantification of volcanic risks, insurers will be able to design adequate insurance coverage.
Martin Bertogg, head catastrophic perils at Swiss Re, said: “The new model allows us to calculate premiums for this important risk for individuals, businesses and countries.
“It’s now up to us in the insurance industry to use this new opportunity, together with all partners, to design trustworthy and affordable coverage to help make the world more resilient when disaster strikes.”
Related stories:
Allianz Global Assistance reveals recent nat cat costs
Over $1bn in natural disaster losses globally for February
.jpg)
