terra seismic at 12th insurance linked securities summit
DESCRIPTION
Cat Bond Markets : New horizons are approaching. For Cat Bond Players, Insurers, Resinsurers, Asset Managers and Risk OfficersTRANSCRIPT
Cat Bond Markets : New horizons are approaching
Terra Seismic at 12th Insurance Linked Securities Summit, New York, 30th September, 2013
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If you know the time and location of shortly forthcoming big earthquakes, preparation can substantially reduce human misery and losses. Governments, cat bond players, insurers, reinsurers, risk officers, asset managers can use this information to mitigate risks and avoid huge losses.
In 2011, an unimaginable earthquake struck Japan and triggered a devastating Tsunami
$2 billion across 10 bonds were impacted, both through indemnity and parametric structuring of contracts - Muteki Ltd. Was fully triggered and $300 million collateral was paid out to
originator - 4 other bonds were downgraded until their expiration
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2.25.11 3.4.11 3.11.11 3.18.11 3.25.11 4.1.11 4.8.11 4.15.11 4.22.11 4.29.11 5.6.11
CAT Total Return Index Post Tohoku Index down and out by 7% for more than 2 months!
It doesn’t have to be so. But to understand this, we will do a little bit of myth busting. 2
Biggest Myth about quakes: Big Earthquakes are not forecestable
Case 1. Japan, Tokyo Earthquake: It’s common in Japan that every 100 years a big EQ will hit Tokyo. Last time it happened in 1923. Case 2. Chile, Atacama: Magnitude 8.0 or more Chile earthquakes on Atacama range - These releases of energy are once in every 75 to 150 years. Last time it happened in 2010 Case 3. Turkey, North Anatolian fault: A magnitude 7.0 or more earthquake occurs approximately every 10 years on the North Anatolian fault. Last time it happened in 1999 Case 4. Japan, Tokai Earthquake: Regularly with an interval of 100 to 150 years the Tōkai segment has been struck by great shallow earthquakes in 1498, 1605, 1707 and 1854. Case 5. Italy, L'Aquila earthquakes: The city was struck by strong earthquakes in 1315, 1349, 1452, 1501, 1646, 1703, 1706, and 2009.
Until now, most important question evades us - But the most relevant question - can we calculate probability for each of
these quakes that it strikes, say, within shorter period of time, say, within
next one-two month?
History of Earthquakes across Major Fault Lines -
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Another Myth: After a big earthquake occurs, a repeat earthquake in the same area is unlikely
Case 1. The catastrophic 2008 Sichuan (MS=8.0) Earthquake that led to 70,000 people losing their life has been followed by several seismic activities including the 2013 Lushan (MS=7.0) Earthquake in the same province of China resulted in 196 people dead, 24 missing, at least 11,826 injured.
Case 2. New Zealand experienced a significant earthquake (ML=7.1) near Christchurch in September 2010 and a repeat one of ML=6.3 across the same fault in February 2011 that was much more damaging and become one of the nation's deadliest peacetime disasters.
Earthquakes are forecastable and repeat earthquakes in same area can be anticipated before they occur. Now, we want to show you a few of our forecasts in the last months.
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Date and Time of the forecast
(UTC)
Latitude,
degrees
Longitude,
degrees Magnitude Region
Lag Forecast
results
The real
magnitude (days)
4.06.13 15:00 44.00±1.5 11.00±1.5 5+ Italy 16 21.06.13 10:33 5.3
www.terraseismic.com: World-wide alerts for major earthquake Successful forecasts - Example from Italy
On the 4th June Terra issued forecast for M5+ earthquake in Northern Italy with
below forecasting data (blue):
Sixteen days later, on the 21st June, M5.3 earthquake (red) hit the defined area. Statistically, there is just a 4% chance of forecasting 21 June 5.3M event at random!
Realized epicenter
Terra’s forecast radius
(dangerous area)
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Date and Time of the forecast
(UTC)
Latitude,
degrees
Longitude,
degrees
Magni-
tude
Region Lag Forecast
results
The real
magnitude (days)
5.04.13 15:00 35.00±1.5 135.00±1.5 6 Japan 7 12.04.13 20.33 5.8
www.terraseismic.com: World-wide alerts for major earthquake Example from Japan
Realized epicenter
Terra’s forecast radius
(dangerous area)
On the 5th April Terra issued forecast for M6 earthquake in Japan with below
forecasting data (blue):
Seven days later, on the 12th April, an M5.8 earthquake (red) hit the defined area and 33 people
were injured (9 seriously) – 4151 houses damaged, 2 destroyed.
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Date and Time of the forecast
(UTC)
Latitude,
degrees
Longitude,
degrees Magnitude Region
Lag Forecast
results
The real
magnitude (days)
5.03.13 14:00 29.00±1.5 52.00±1.5 5.5+ Iran 35 9.04.13 14:44 6.3
Realized epicenter
www.terraseismic.com: World-wide alerts for major earthquake Example from Iran
On the 5th March Terra issued forecast for M5.5+ earthquake in Iran with below
forecasting data (blue):
Terra’s forecast radius
(dangerous area)
Bushehr atomic
plant
On the April 9th, 35 days later a M6.3 earthquake (red) hit in the defined area, close to Iran
Bushehr atomic plant: luckily, no serious damage to reactor. Persian Gulf is the world’s most
important oil transportation artery. What will be consequences for oil prices & financial markets if
future event was more serious? 7
Date and Time of the forecast
(UTC)
Latitude,
degrees
Longitude,
degrees
Magnitude
Region Lag
Forecast
results The real
magnitude (days)
22.06.13 15:00 2.00±2.0 100.00±2.0 5 Indonesia 13 06.07.13 10:33 6.1
www.terraseismic.com: World-wide alerts for major earthquake Example from Indonesia
Sample: On the 22th June Terra issued forecast for M5 earthquake in Indonesia with
below forecasting data (blue):
On the July 6th, 13 days later M6.1 earthquake (red) hit in the defined area in the sea, close to Kuala Lumpur,
Malaysian capital and big financial center. In the case future earthquake in this area will produce tsunami, what will
be consequences for Asian financial markets?
Terra’s forecast radius
(dangerous area)
Realized epicenter
Kuala Lumpur
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Date General Location Latitude Longitude Mag range Day range 8.31.2013 Pakistan 26N±1.5 67E±1.5 5.5 1-30
9.18.2013 Pakistan 28.5N±1.5 70E±1.5 6 1-30
9.22.2013 Off coast of Pakistan 23N±1.5 64E±1.5 5.5 1-30
Behind the Scenes of last week’s Pakistan Earthquake prediction 3 alerts over last month -
Date of quake Time(UTC) Region Lat Long M Lag(days)
9.24.2013 11:29 Pakistan 27N 65.5E 7.7 24 9
Date General Location Latitude Longitude Mag range Day range
9.6.2013 Southern Peru 17S±1.5 72W±1.5 6+ 1-40
Behind the Scenes of last week’s Peruvian Earthquake Prediction The 6th of September Forecast -
Date of quake Time(UTC) Region Lat Long M Lag(days)
9.26.2013 16:42 Near Coast of Southern Peru
15.91 74.63 7 19
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An earthquake is a physical event when enormous energy is releasing. But, energy
is releasing not just when an earthquake strikes, BUT ALSO during
PREPARATORY STAGE of the future earthquakes. Release of this
excessive(above normal) energy always lead to:
Appearance of unusual
behavioral of living
beings, such as animals,
frogs, snakes, dogs,
fishes etc. and
appearance of very
unusual natural events
which may be detected
by local residents close
to the area of the future
earthquake
Unusual phenomena before earthquakes
frogs are escaping area of future
quake before event
12 May 2008 unusual colorful
clouds 30 minutes before
Sichuan quake
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An earthquake is an enormous release of energy. However this energy is not released only when the event occurs, but also during several stages before the earthquake. Release of this excessive energy leads to:
The appearance of abnormalities (thermal, ionic,
etc.) in the atmosphere near the location and
timing of a future earthquake. These
abnormalities can be detected by today’s satellite
earth observation systems and ground based
instruments. Overall, Our R&D team consolidates
the results of efforts in seismology, plates
tectonics theory, geochemistry, atmospheric
electricity, applied aerospace, geology, theory of
nonlinear processes and others.
By observations of Pre-Earthquake Phenomena from satellite earth observation systems
How can earthquakes be forecasted up to 30 days before they occur?
This consolidated model can identify the region of major, future earthquakes up to 30 days before the event. Up
to now, this has been impossible, and we want to share this amazing technology with you, so we can save lives
and educate the world about these events. 12
Introducing Dynamic Risk in EQ Risk Assessment: L’Aquila (Italy) Example
1315 1349 1452
One way to calculate earthquake risk is Static risk through historical likelihood of the
event across a specific fault segment. On the other hand, Dynamic risk of a quake in
specific area is calculated on observed phenomena of acceleration of seismic
processes. These processes act as precursors for our forecasts.
Let’s take the example of L’Aquila to Illustrate how to use both in conjunction -
1501 1646 in Dec 2008
5 April 6 April 2009
M6.3 quake,
307 people killed…
now
5 month period of increased
Dynamic risk
M4.5
quake Observed unusual
phenomena series of quakes,
quake lights, unusual
behavior of living beings, etc
Dec 2008
Then, suddenly…
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302 years of Static risk
1706 Return to period of no precursors:
price risk statically in long run
contracts until next period of dynamic
risk
Earthquakes in L’Aquila
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Short-term (up to 30 days) earthquake forecast for >5.5M
events Update is daily
Mid-term (1-3 months) earthquake
forecast for >6M events
Update is monthly
Long-term (up to 5 years) earthquake
forecast for major(>7.5-8M+)
events Update is 6 mo.
Eart
hq
uak
e A
lert
Info
. Se
rvic
es
Proprietary research on earthquakes and
financial markets Impact on various
markets and possible EQ scenario analysis
Hedging and investment solutions
Solutions for before and after event that improve
rational behavior
New market and product
development We provide you
with the Terra big picture
General public through media
market To save lives and to
educate about natural world
Government and international
bodies To help first
responders and market coordinators
Co
nsu
ltin
g an
d
solu
tio
ns
Edu
cati
on
an
d o
utr
each
Our coverage: Japan, USA, Italy, Taiwan, China, Turkey, Mexico, Indonesia, Philippines, New Zealand, Chile, Peru, Greece, Thailand, India, Pakistan, Australia, all European countries, etc. On demand services for your region.
Location and Scenario analysis of
20 mega quakes expected in 2013-
2018
Terra Seismic’s product line
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Today
Next Day
Alerts!
Daily update of alerts for
1-2 days before
events, with 10% false alarm - to save lives
and assets!
Tomorrow
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FOCUS: Short Term forecasting via our operational site Clients can purchase services at www.terraseismic.com
Website gives you access
to “Time Machine.”
This service allows you to
see our daily forecasts, like
the one to the left for Peru.
Specifically, we provide
epicenter and radius,
magnitude interval, and
expiry date of alert.
A Better Value of Risk
The model is very good at
capturing events, with some
error. As you can see from right,
we capture all types of seismic
events. However, we are
exceptionally good at capturing
impact events, M6+ and above. Realized epicenter
Terra Forecast
Terra forecast – radius of area at risk
Based on high reputed scientist and their 20 years of peer reviewed work, we can offer two product that regularly update (every 6 months) areas at high risk of big magnitude event in next 3-5 years.
Provides with 660Km radius of space for high risk of M8.0+ events. There have been 21 such events in last 28 years, this model has caught 16 of them, or more than 75% of these events!
Technology A – “Diminishing Uncertainty” value
Technology B – “Sure thing” value
Provides radius of 330Kms for high risk of M7.5+ events with exceptionally low levels of false alarm, just over 7%! This means that when a forecast is issued, it will realize with 92% likelihood.
Circles provide clear visualization of areas of risk. We also provide list of major landmarks at risk.
FOCUS: Long Term forecasting technology
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Dynamic Risk creates new opportunities and solutions for industry Present opportunities - strengthening investor side
We have shown dynamic risk is indisputably real. It’s important
that you find a method to input this into your risk assessment
and loss estimation.
If you are looking for a long term investment, you can re
evaluate these with long term dynamic risk technologies – up to
5 years.
Solution №1
Introduce Dynamic
Risk notion
in your short term
decision making
Solution №4
Re evaluate new
issuances
Solution №2
Arbitrage
opportunities
for Current
Portfolio
Re evaluation portfolio – You can use dynamic risk to
recalculate expected loss of catastrophe bonds. This can
then be evaluated amongst other assets and re allocation of
portfolio can be made to maximize your returns.
Solution №3
Other Hedging
solutions
If you cannot find a market for Cat Bonds, you can invest in
positive catastrophe equity and mitigate cat bond losses before
they occur. They are many positive opportunities such as equity
that is involved in reconstruction – helping rebuild damaged
societies.
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Dynamic Risk creates new opportunities and solutions for industry Long term opportunities - strengthening market and creating new markets
We provide confident forecasts for large geographic areas –
splitting this risk up across time and space can limit expected
loss and create new types of bonds that are marketable and
relevant to areas of high risk.
Positive earthquake fund can be created which allows you to
easily trade equity across the globe in certain areas which will
react positively to earthquake losses.
Solution №5
New catastrophe
bonds based on
long(er) term
dynamic risk
Solution №6
positive impact
across life
indemnity
Forecasting of earthquakes is primarily about saving lives. As
our the technology becomes more precise and more known
across seismically prone areas, people can take precautions
to limit their own risks and therefore reduce life insurance
losses after an event.
Solution №7
Re invent short
term
complements to
ILS
cat e puts, sidecars, (ILW) Industry loss warranty contracts
can be created based on short term dynamic risk, and thus
allow for new markets of hedging ILS and other earthquake
related losses
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Terra’s Products Long term
Leve
l of
Mar
ket
Pen
etra
tio
n
Excl
usi
ve f
irst
clie
nts
In
du
stry
nam
e
Short term
Opportunities on ILS and equity markets
Arbitrage Opportunities for Issuance
Catastrophe Linked Equity Index
New ILS instruments based on our long term risk assessment
Summary: Current and Future term Opportunities
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80
85
90
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105
MCB Bank Ltd
AICL Pa Insurance
KSE All Stock
HUBC PA Power
OGDC PA Oil and Gas
Theory to Practice: the Forecasted September 24th Pakistani Megaquake and subsequent Financial Market reaction
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300000000
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15200
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KSE All Stock – Before EQ
Volume
Last Price
The KSE100 has experienced YTD returns of over 46%. The month of September
was an equally good month, with strong growth and healthy activity.
On 24th of September, a M7.7 earthquake
struck the province of Balochistan,
Pakistan. It was a local catastrophe, and
Karachi Stock Exchange reacted (right)
negatively. Energy, Insurance and Banking
sectors fell drastically.
Terra issued 3 alerts for this event, first
one up to 25 days before the
earthquake. With this information, It’s
possible to hedge losses and improve
your portfolio.
Terra Seismic Plc – we can create new Planet for Mankind
Today’s Earth New Planet
Terra Seismic Plc is a world leader in providing services for short, mid and long-term earthquake forecasts for 150 countries. The Terra team uses proprietary satellite-based
technologies and unites leading international geoscientists with financial experts in developing novel solutions for the stakeholders of earthquake risk – 4.5 billion people.
Where earthquakes strike suddenly, causing human loss and destroying livelihoods - such as 2011 Fukushima
atomic plant disaster
Where earthquakes happen, but societies are adequately prepared and material losses are efficiently insured
www.terraseismic.com
Satellite Technologies and Global Internet System to reduce the risk and damage from earthquakes
Terra Seismic is a High Tech Company that provides services for short, mid
and long-term earthquake forecasts for 150 countries Selected Forecasted and Realized Earthquakes since March 2013
If you know the time and location of shortly forthcoming big earthquakes, preparation can substantially reduce human misery and losses. Insurers, Reinsurers, Risk officers, Asset Managers, Government Agencies and Large Multinationals can use this information to mitigate risks and avoid huge losses.
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Terra Seismic (Terra) global successful forecasts: an Overview
Terra technology provides an early notification, 5-30 days in advance, for most of the global major
earthquakes (EQs)
Terra’s services for short to medium term forecasts of strong earthquake events are available for major
seismic regions which include up to 150 countries around the world
About 100-140 dangerous earthquakes (with Magnitude M>6) strike on our Planet annually. While Terra
has capability to detect these, we wish to focus on the most potentially harmful. There are 25-40 countries
where such EQs can bring a substantial loss of life and property.
Major EQs in the coastal regions cause substantial damage through tsunamis. With certain confidence,
Terra can identify an epicenter of an EQ and this can be used to prepare for different kinds of risk, including
land and water.
Today we are able to identify potentially dangerous EQs areas with radius of 150-200 km with average
confidence interval of 55-70%. We are actively working on improving our forecasting capabilities.
In the next few slides we present our recent forecasts, and their realization across major markets such as
Japan, Italy, Mexico, Chile, Philippines and a few specific events that you might find interesting. Each slide
gives you a set of columns with the date, magnitude, and location of the projected earthquake, followed by
the same information about the actual EQ that occurred. The last column gives you the lag between our
date and the actual date.
Date Time (UTC) General Location Latitude Longitude Mag range Day range 10.23.2013 16:00 Atacama-Chile 27.5S±2.0 71W±2.0 6.0+ 1-45
Behind the Scenes of recent Chilean Earthquake prediction, our www.terraseismic.com forecast:
Date Time(UTC) Region Lat Long M Lag(days)
10.31.2013 23:03 Coquimbo, Chile 30.29S 71.57W 6.5 8
Date Time (UTC) General Location Latitude Longitude Mag range Day range 10.20.2013 14:00 Offshore Bio Bio Chile 36S±2.0 73W±2.0 6.0 1-40
Behind the Scenes of recent Chilean Earthquake prediction, our www.terraseismic.com forecast:
Date Time(UTC) Region Lat Long M Lag(days)
10.30.2013 02:51 Off shore Maule, Chile 35.32S 73.02W 6.3 9
Date Time (UTC) General Location Latitude Longitude Mag range Day range 9.21.2013 19:36 Gulf of California 29N±2.0 113W±2.0 6.0 1-40
Behind the Scenes of recent Gulf of California Earthquake prediction, our forecast:
Date of quake Time(UTC) Region Lat Long M Lag(days)
10.19.2013 17:54 Gulf of California 26.37N 110.37W 6.5 28
Date Time (UTC) General Location Latitude Longitude Mag range Day range 10.14.2013 16:03 Pakistan 27N±2.0 65E±2.0 6.5+ 1-40
Behind the Scenes of recent Series of Pakistan earthquakes Our Forecast:
Date of quake Time(UTC) Region Lat Long M Lag(days)
10.18.2013 13:18 Pakistan 28.34N 66.56E 5.3 4
10.20.2013 5:11 Pakistan 27.31N 65.57E 4.5 6
10.20.2013 5:27 Pakistan 27.19N 65.87E 4.7 6
A forecast like above can occur as one event or several weaker events. For
example, in the case of Pakistan, we see a series of earthquakes in the location of
the above forecast during the exact time interval.
Date Time (UTC) General Location Latitude Longitude Mag range Day range 10.12.2013 14:00 Philippines 12N±2.0 125E±2.0 6.0+ 1-40
Behind the Scenes of recent Philippines Earthquake prediction Our Forecast:
Date of quake Time(UTC) Region Lat Long M Lag(days)
10.15.2013 00:12 Philippines 9.93N 124.16E 7.1 3
Left - Screen shot
from our Website
showing area of
alert issued 3 days
before event
(green)
Date Time (UTC) General Location Latitude Longitude Mag range Day range 10.12.2013 12:36 Southern Greece-Crete 34N±2.0 25E±2.0 5.0+ 1-30
Behind the Scenes of recent Crete Earthquake prediction Our Forecast:
Date of quake Time(UTC) Region Lat Long M Lag(days)
10.12.2013 13:11 Greece 35.6N 23.3E 6.4 <1
Screen shot from
our Website showing
area of alert (green):
Behind the Scenes of recent Romania Earthquake prediction Our Forecast:
Date General Location Latitude Longitude Mag range Day range
09.14.2013 Romania 45N±1.5 25E±1.5 6+ 1-30
Date of quake Time(UTC) Region Lat Long M Lag(days)
10.06.2013 1:37 Romania 45.6N 26.7E 5.3 20
Behind the Scenes of Gansu Earthquake Date of forecast: June 22nd 2013
Date of quake Time(UTC) Region Lat (±2.0) Long(±2.0) M Lag(days)
15.07.2013 14:02 Dominican Republic 19.3 -70,15 4,9 23
05.07.2013 0:53 Merida, Venezuela 8.84 70.93 4,6 13
21.07.2013 23:45 Gansu, China 34.52 104.23 6 29
06.07.2013 14:00 northern Sumatra:
Indonesia 3.26 100.53 6 14
Date of forecast Time(UTC) Region Lat (±2.0) Long(±2.0) M Period(days) Level
22.06.2013 14:00 Haiti region 20 -72 5 1-30 beta
22.06.2013 14:00 Venezuela 10 -62 5,5+ 1-35 beta
22.06.2013
14:00 northern Sumatra:
Indonesia 2 100 5 1-30 beta
22.06.2013
14:00 Sichuan-Gansu
border region: China 32 105 6 1-35 beta
Some of the most serious quakes forecasted by Terra this year Gansu, China, July 21nd 2013
Terra’s Forecasting M7+ events
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