EQECAT, Press Room

EQECAT Selected to Assist Taiwan Insurance Industry Earthquake Insurance Pool Study

October, 1999

EQECAT was selected by government-owned Central Reinsurance Corporation (CRC) of Taiwan to assist in a feasibility study for a voluntary residential earthquake insurance pool. The action was in response to the September 21, 1999 Chi Chi Earthquake, in which 107,000 households were destroyed because they were in collapsed or partially collapsed buildings. EQECAT will use its advanced catastrophe models combined with expert consulting support to develop adequate rates or tariffs, establish appropriate underwriting criteria and assess the necessary reinsurance or securitization to ensure the solvency of the program.

The objectives of the insurance pool include:

Availability: Earthquake insurance should be widely available to consumers.
Underwriting: The program can either require risks to meet minimum underwriting standards or all risks can be accepted with rates that properly reflect the risk exposures.
Actuarially Sound: Rates and exposures will be based on underwriting standards, using modern risk modeling techniques to estimate the loss potential.
Economically Viable: Through the use of reinsurance and/or risk securitization techniques, ensure that the program is economically viable and will respond in the event of a major earthquake.

The achievement of the above objectives calls for a rating and underwriting system based on risk quantification. EQECAT will assist CRC in performing the following tasks:

Development of probabilistic loss exceedance estimates.
Development of rates based on annualized hazard occurrence, soil conditions and structure vulnerability functions.
Establishment of Policy conditions (limits, deductibles and coverage provisions) and underwriting standards that support the overall program objectives.
Active management of accumulations and total exposures to predetermined limits to achieve financial objectives.

EQECAT, Inc., a subsidiary of EQE International, is a leading provider of catastrophe management software and consulting services to the insurance and financial communities. EQE International, a member of the ABS Group of companies, has more than 600 employees worldwide.