China Re P&C Updates China Re Exposure Curves

　　In recognition of the rising frequency of large losses and increasing loss severity, China Property & Casualty Reinsurance Company Ltd. (“China Re P&C”, “the Company”) is providing an update of the China Re Exposure Curves. The updated curves, which were initially issued in 2013 as the first exposure curves in China, were officially released at the 2015 China P&C Reinsurance Market Conference on 10th Sept.

　　Similar to the mortality table in the life insurance industry, the exposure curve represents the overall average loss level of the P&C insurance industry. The curves vary based upon the unique risk features of different countries. In September 2013, China Re P&C released the first set of exposure curves for the Chinese market. The risks are divided into four groups: storage risks, low-risk industrial risks, high-risk industrial risks and common commercial risks. The curves indicate that the probability for large loss in China is highest for storage risks. Large loss probability then reduces, in order, from high-risk industrial to low-risk industrial risks and finally common commercial risks.

　　The first version of the China Re Exposure Curve was derived by analyzing property insurance data for losses occurring before the first half of 2013. However, during the last two years, China’s P&C insurance industry has experienced significant changes in loss patterns.

　　It is well known that the rising frequency of large losses and increasing loss severity are factors that predominantly influence property exposure curves. During the past two years the domestic property insurance market has experienced a surge of increased risk exposure as well as an upward trend in the frequency and severity of large losses. For example, the SK Hynix fire and Tianjin warehouse explosions have set successive new records for the largest claim. By analyzing the last five years of large losses, it is evident that the frequency of losses greater than 10 million rose substantially. Loss severity experienced the same trend: the average claim payment growth rate was higher than the growth rate of average insured value. Therefore, driven by the more recent major loss occurrences and property insurance data, China Re P&C has upgraded its exposure curves to reflect the upward trend of large losses. Further, storage risk and high-risk industrial risk exposure curves have been given a major adjustment to reflect the historical major losses and the tendency for increased risk exposure in those segments. At the 2015 market conference, China Re P&C also released its online service platform, which includes the China Re Exposure Curves, catastrophe insurance pricing, a high-value motor insurance pricing system and other projects. This platform integrates all of the present insurance industry services provided by China Re P&C.

　　During 2015 China Re P&C Industrial Experience Research Center developed a high-value motor insurance pricing system. The system was developed to provide an online quoting process for high-value motor insurance. This system aims to improve the efficiency of the high-value motor insurance’s online underwriting process and develop a framework for reinsurance support. At present, it is the only available platform in China which applies to both proportional and non-proportional high-value motor reinsurance—much more convenient than any of its rivals. In case the underwriting company lacks experience data, this system assists the primary companies with pricing and reinsurance.