Insurance Risk Study - Aon

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Insurance Risk Study Global Risk Parameters The 2010 Insurance Risk Study quantifies the systemic risk by line for 46 countries worldwide, up from 26 last year. Systemic risk in the Study is the coefficient of variation of loss ratio for a large book of business. Coefficient of variation (CV) is a commonly used normalized measure of risk defined as the standard deviation divided by the mean. Systemic risk typically comes from non-diversifiable risk sources such as changing market rate adequacy, unknown prospective frequency and severity trend, weather-related losses, legal reforms and court decisions, the level of economic Coefficient of Variation of Gross Loss Ratio by Country Japan Turkey Taiwan South Korea Israel Australia Austria Czech Republic Switzerland Germany Mexico France Argentina Spain Italy Bolivia U.K. China Netherlands Chile India Brazil Uruguay Malaysia Colombia Poland U.S. Peru Vietnam Canada Venezuela El Salvador Honduras Ecuador Romania Denmark South Africa Slovakia Dominican Republic Singapore Indonesia Panama Hong Kong Greece Nicaragua 4 Motor Property Hungary 4% 8% 5% 6% 7% 7% 7% 8% 8% 8% 9% 9% 9% 9% 9% 9% 10% 10% 11% 11% 11% 12% 12% 12% 13% 15% 15% 15% 16% 16% 18% 18% 18% 18% 18% 21% 23% 24% 25% 25% 25% 27% 29% 35% 43% 46% Israel South Africa Australia Italy Switzerland Germany Austria Spain Panama U.K. Denmark Chile Canada China Malaysia Japan India Turkey France Venezuela Uruguay El Salvador Vietnam Bolivia Hungary South Korea Poland Netherlands Slovakia U.S. Ecuador Dominican Republic Argentina Brazil Romania Colombia Honduras Indonesia Nicaragua Hong Kong Singapore Greece Peru Mexico 64% Taiwan Americas Asia Pacific Europe, Middle East & Africa activity, and other macroeconomic factors. It also includes the risk to smaller and specialty lines of business caused by a lack of credible data. For many lines of business systemic risk is the major component of underwriting volatility. The systemic risk factors for major lines by region appear on the next page. Detailed charts comparing motor and property risk by country appear below. The factors measure the volatility of gross loss ratios. If gross loss ratios are not available the net loss ratio is used. 13% 16% 17% 18% 18% 18% 19% 21% 22% 22% 25% 26% 27% 28% 28% 31% 31% 32% 36% 37% 38% 38% 38% 40% 42% 42% 43% 44% 45% 46% 51% 51% 53% 54% 54% 58% 58% 62% 67% 71% 73% 91% 92% 98%
Underwriting Volatility for Major Lines by Country, Coefficient of Variation of Loss Ratio for Each Line Americas Motor Motor - Personal Motor - Commercial Property Property - Personal Property - Commercial General Liability Accident & Health Marine, Aviation & Transit Workers Compensation Credit Aon Benfield Argentina 9% 51% 61% 116% 164% Bolivia 10% 38% 18% Brazil 12% 53% 48% 60% 57% 45% 43% 58% Canada 18% 26% 18% 41% 37% 43% 72% 110% 116% Chile 12% 25% 51% 65% Colombia 15% 54% 55% 57% 71% Dominican Republic 25% 51% 120% 64% Ecuador 21% 46% 49% 178% El Salvador 18% 38% 21% 100% Honduras 18% 58% 5% 193% Mexico 9% 92% 65% 43% Nicaragua 64% 62% 91% 107% Panama 35% 21% 24% 103% Peru 16% 91% 60% 7% 21% 68% 77% Uruguay 13% 37% 124% U.S. 16% 14% 24% 45% 51% 34% 37% 52% 39% 28% 70% Venezuela 18% 36% 23% 160% Asia Pacific Australia 8% 16% 23% 32% 54% 10% 30% China 11% 11% 27% 31% 19% 16% 113% Hong Kong 43% 44% 67% 82% 24% 60% 81% India 12% 12% 31% 14% 31% Indonesia 29% 29% 58% 124% 56% 72% 55% 92% Japan 5% 28% 10% 8% 17% 7% Malaysia 15% 28% 126% 30% 40% 88% Singapore 27% 71% 52% 57% 46% South Korea 7% 7% 42% 32% 55% Taiwan 7% 7% 98% 53% 33% 71% 44% Vietnam 18% 38% 41% 11% 38% Europe, Middle East & Africa Austria 8% 18% 12% 52% 21% 13% 21% 51% Czech Republic 8% Denmark 24% 22% 18% 33% 18% 16% 39% 23% France 9% 32% 35% 26% 30% 25% 57% Germany 9% 18% 20% 31% 29% 14% 22% 43% Greece 46% 73% 81% 81% Hungary 4% 40% Israel 7% 8% 53% Italy 10% 17% 25% 12% 46% 40% 72% Netherlands 11% 43% 26% 49% 54% 41% Poland 15% 42% Romania 23% 54% Slovakia 25% 44% South Africa 25% 13% 61% 33% 46% Spain 9% 19% 10% 23% 30% 13% 34% 48% 97% Switzerland 9% 18% 21% 7% 50% 73% Turkey 6% 10% 31% 44% 36% 15% 93% 52% U.K. 11% 10% 18% 22% 21% 26% 30% 8% 67% Reported CVs are of gross loss ratios, except for Argentina, Australia, Bolivia, Chile, Ecuador, India, Malaysia, Singapore, Uruguay, and Venezuela, which are of net loss ratios. Accident & Health is defined differently in each country; it may include pure accident A&H coverage, credit A&H, and individual or group A&H. In the U.S., A&H comprises about 80 percent of the ”Other” line of business with the balance of the line being primarily credit insurance. Fidelity & Surety 5
Page 1 and 2: Insurance Risk Study Fifth Edition
Page 3: Foreword Since the first internal A
Page 7 and 8: Solvency II Correlation Coefficient
Page 9 and 10: Industry Reserve Adequacy: How Long
Page 11 and 12: Year-Over-Year Change in Gross Loss
Page 13 and 14: Germany Japan U.K. U.S. Accident &
Page 15 and 16: Americas - Liability Europe - Liabi
Page 17 and 18: Size and Correlation Insurers of di
Page 19 and 20: Managing Inflation Risk Risk manage
Page 21 and 22: Global Market Review With rates con
Page 23 and 24: Global Premium, Loss Ratio and Vola
Page 25 and 26: Afterword: The Greatest Risk In las
Page 27 and 28: For more information on the Insuran

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