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6 April 2021 — Marina MAGNAVAL

A year after the release of the review of the rating agency S&P Global Ratings, the first earthquake risk model Tremblor with a high degree of detail on the zoning of the territory was presented on the Kazakhstani insurance market.

Tremblor was developed specifically for the Republic of Kazakhstan by leading experts of the London insurance market with the participation of MOI Insurance Broker.

The model was presented at the online seminar "Earthquake Risks in Kazakhstan: how can insurers protect their portfolios", which took place on March 25, 2021, reports

Most of the territory of Kazakhstan is subject to the risk of earthquakes, and at least 40% of industrial facilities, infrastructure, including financial institutions, as well as about 30% of the population are concentrated in the affected areas.

In its review of risks and opportunities, as well as forecasts for the development of the Kazakhstani insurance sector for 2020, the rating agency S&P Global Ratings pointed to the potential exposure to natural disaster risks, in particular earthquakes of Kazakhstani non-life insurance companies. At the same time, only a few insurance companies, having S&P ratings, assess the possible maximum loss and acquire sufficient reinsurance coverage for catastrophic risks. The main reason for the inadequate (insufficient or excessive) level of reinsurance protection of earthquake risks of Kazakhstani non-life companies was the lack of adapted models for assessing catastrophic risks.

Tremblor uses division by 256 cross-zones, while the standard models used by global reinsurers divide only by 3-4 cross-zones. After an event, the model allows to quickly assess the insured damage and determine the budget for losses and the form of their payment. Application of the model will allow the country's economy to understand and develop the concept of earthquake risk, and insurers will be able to buy adequate, but not excessive, natural disaster protection to protect their assets, the developers say.

Gaukhar KASYMKANOVA, Managing Director of MOI Insurance Broker, noted: "Tremblor is an ideal solution for those areas that are prone to earthquakes and which are not modeled by the leading players in this field. The main result of the model is that insurers know their maximum probable loss or PML (Probable Maximum Loss) in a given earthquake scenario. Moreover, in our model, we can determine the PML by the class of insurance. This provides shareholders, management, and other stakeholders with knowledge of the potential impact of earthquakes on their insurance portfolios", she said.

Richard KING, Director of London-based Beit Software and AirSP member, emphasized: "There is now a model in Kazakhstan that presents the impact of earthquake risk with a high level of detail and interactively. The data used in the model is provided by the USGS agency and contains information on more than 4000 earthquake events in the region since 1973. The algorithms of the model are built in accordance with accepted international standards".

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