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<strong>Munich</strong> <strong>Re</strong><br />
involving many different insured<br />
objects at the same time, giving<br />
rise to immense claims burdens.<br />
The balancing of risks within a<br />
community of policyholders, one<br />
of the fundamental principles of<br />
insurance, therefore functions only<br />
on a regional or global basis.<br />
The insured losses from the winter<br />
storms in Europe in 1990 amounted<br />
to US$ 10 billion, those from Hurricane<br />
Andrew in the USA in 1992 to<br />
US$ 20 billion, and those from the<br />
earthquake near Los Angeles in<br />
1994 to US$ 12.5 billion.<br />
In fact, the estimated potential<br />
maximum losses for such events<br />
are far beyond these amounts:<br />
for example, US$ 20 billion for a<br />
windstorm loss event in Europe,<br />
US$ 50 billion for a hurricane in the<br />
USA and US$ 150 billion for an<br />
earthquake in California.<br />
Providing cover for losses caused<br />
by natural catastrophes continues<br />
to be a central task of the international<br />
insurance industry. Owing<br />
to the immense loss potentials<br />
involved, however, this can only be<br />
tackled properly by means of a<br />
“risk partnership” involving state,<br />
insureds, insurers and reinsurers.<br />
On 4th and 5th September 1995 Hurricane<br />
Luis caused widespread devastation on<br />
the Caribbean islands of St. Martin and<br />
St. Barthélemy.<br />
47<br />
The state needs to create the<br />
necessary legal framework. This<br />
requires above all adopting and<br />
enforcing building codes and landuse<br />
regulations in order to prevent<br />
and reduce losses. The state<br />
also needs to ensure freedom of<br />
services and free movement of<br />
capital. This gives the local direct<br />
insurers access to the international<br />
reinsurance market and allows<br />
reinsurers to achieve the requisite<br />
global balance.<br />
The involvement of the state as risk<br />
financer, on the other hand, is only<br />
called for – if at all – where the<br />
coverage required exceeds the<br />
capacity that can be organized by<br />
the insurance and reinsurance<br />
markets worldwide.<br />
Insureds, too, need to play their<br />
part in this risk partnership – on<br />
the one hand by complying with<br />
regulations and recommendations<br />
and on the other by bearing an<br />
appropriate part of claims themselves<br />
in the form of deductibles,<br />
as has long been customary in<br />
such classes of insurance as<br />
motor own damage. Deductibles<br />
substantially diminish the overall<br />
insured loss, not least through the<br />
lower number of claims that need