Satellite Risk & Insurance
Dubai 1-3 March 2010
An Underwriter’s Perspective
Didier ParsoireChief Underwriting Officer, Space
SCOR Global P&C
Space Insurance: A Volatile MarketMarket Loss Ratio
0%
50%
100%
150%
200%
250%
Source: SCOR
Dubai 1-3 March 2010
• Volatility due to:• Small population of risks
• High claim severity
• Cyclical market volume and price
• Capital is the measure of volatility
0%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Introducing Capital Allocation
• Capital requirement under Solvency II rules: • To cover all risks an insurer faces (insurance, market, credit and
operational risk)
• Calculated as Insurer’s expected loss with a 99.5% confidence level
over a one year time horizon
Dubai 1-3 March 2010
• Target ROE drives profitability requirement
• A need to model extreme eventsTarget Premium
Average
Cla
im
Int.
Exp
enses
Ext. E
xpense
sTarg
et RO
E
Extreme Events for Satellites
• Correlation of risks in time and space• Solar flares, In-orbit collisions, Leonids, Generic Defects…
• Focus on generic defects• A substantial part of
market claims
80%
100%
Non-generic Claims
Generic Claims
Dubai 1-3 March 2010
market claims
• Design/Manufacturing/Testing:
From minor deviations to
major technological steps
• How to build a model capturing both individual &
serial risks ?
0%
20%
40%
60%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: SCOR
Satellite Risk Model (individual risks)
• Severity model• Based on observed loss quantum
• Fitting MBBEFD curves (Post-separation & In-orbit risks)
Dubai 1-3 March 2010
• Frequency model• Poisson distribution fit to observed numbers
Source: SCOR Source: SCOR
Satellite Risk Model(Generic Defects)
• Based on Event scenarios
• Several Event types considered• Gradual loss (e.g. solar cell or TWTA failures)
• Severe loss (e.g. SADA or certain propulsion failures)
• Total loss (e.g. computer or power bus total failures)
Dubai 1-3 March 2010
• Total loss (e.g. computer or power bus total failures)
• The “Big One” (e.g. … a big one)
• For each type, scenario is based on Return period,
Number of affected satellites, Severity
Portfolio Loss Distribution
• Set a reference portfolio• Number of satellites per phase of risk (Post-sep., In-orbit)
• Distribution of values
• Type of coverage (proportional / non-proportional)
• Average premium rate per phase
Dubai 1-3 March 2010
• Average premium rate per phase
• Generate losses according to stochastic model (per
risk and per event)
Results: Claims, Capital & Premium
Case 2 (Base 100 = Case 1)
140 Average Claim
High sensitivity to
Frequency & Severity
Correlation
Loss distribution with Generic Defects (frequency correlation)
90,0%
100,0%
1
Loss distribution w/o Generic defects
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
100,0%
Loss
Pro
ba
bil
ity
Average Claim Amount
Claim (VaR @ 99.5%)
Risk-based Capital
(Stand-alone)
Source: SCOR
Dubai 1-3 March 2010
140
151
192
amount
Risk-based
Capital
Target Premium
Case 3 (Base 100 = Case 1)
140
268
172
Average Claim
amount
Risk-based
Capital
Target Premium
Lo s s d is tr ib u tio n w ith G e n e r ic D e fe cts (fr e q u e n cy & Se ve r ity co r r e la tio n )
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
100,0%
Lo s s
pro
ba
bil
ity
3+40% vs. case 2
Source: SCOR
2
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
Loss
Pro
ba
bil
ity
+40%+92% vs. case 1
Source: SCOR
Summary
• Solvency rules & strong ERM call for adequate capital
allocation among various insurance lines, which in
turn drives profitability
• Allocating capital to Space Insurance requires strong
knowledge of the past and a prospective view on risk
Dubai 1-3 March 2010
knowledge of the past and a prospective view on risk
• Working with Satellite manufacturers and Satellite
operators is key to refine/update Satellite risk model
• Proper capital assessment is also a concern for our
clients who are retaining a substantial part of the risk
Thank you.
Dubai 1-3 March 2010
Didier Parsoire CVWork Experience
2007 to present
SCOR Global P&C
Chief Underwriting Officer, Space specialty line & Alternative
Risk Financing
2000 – 2007
SCOR
Senior Vice President – Head of Space department. Head of
Technology, Finance & Service Corporate Risks underwriting
1992 – 2000
SCOR
Space Underwriter & Head of Space department
Dubai 1-3 March 2010
SCOR
1986 – 1992
MATRA (now Astrium)
Space Engineer - Satellite Design & Ground system integration
Education
1982 – 1985 Graduated Engineer from « Ecole Nationale Supérieure de
l’Aéronautique et de l’Espace » (Supaero) in Toulouse, France
2001 Young Managers Programme - INSEAD business school
Introduction
SCOR is the 5th largest Reinsurer in the world. The group benefits from a
strong global franchise with 51 offices across 5 continents and over 3500
clients. As a multi-line risk carrier, SCOR business strategy is based on a twin-
engine approach :
is dedicated to life reinsurance for individual and group life insurance, long-
term care, substandard risks, critical illness (in United Kingdom and Asia) and financing products.
Dubai 1-3 March 2010
term care, substandard risks, critical illness (in United Kingdom and Asia) and financing products.
is committed to reinsurance as its core business and worldwide presence,
based on two strong balanced business areas: Treaty P&C and Specialty Lines
Space is one of our core specialty lines. SCOR was among the pioneers who
responded to the dedicated needs of the Space industry. Through its
continuous presence over the past 25 years, SCOR has built a leading position
in the Space market.
www.scor.com
In 2010, SCOR celebrates its 40th
birthday