Further details about the Verisk Catastrophe Index

by Artemis on July 29, 2010

We wrote a few days ago about the announcement from Verisk Analytics (parent company of AIR Worldwide and the Property Claims Services (PCS) brands)  about their new high-resolution catastrophe index which they have launched. We felt the press release we’d picked up didn’t give enough information so we’ve been back in touch with them to gather more information for you.

We spoke to Alex Korb, Manager, Corporate Development – Insurance-Linked Securities at Verisk Capital Markets to get some insight into the new index.

He told us that the Verisk Catastrophe Index is a new product created to address the clearly manifested demand for such a benchmark that is driven primarily by insurance-linked capital markets to facilitate a more robust catastrophe risk management. The index will leverage the experience and competency of the Verisk brands. The PCS Index, which details the actual loss reports of insurers and information providers, is available at a state/line of business level of detail. AIR models catastrophes at a more granular level, down to millions of individual locations, and hence provides a different approach to post-event loss estimation.

“The Index uniquely blends the existing capabilities of PCS and AIR. For each event, the geographic distribution of losses produced by the AIR model is used to disaggregate PCS state-level industry loss estimates to a county level,” said Alex Korb. He continued “We plan to expand the Index from the current hurricane perils to include tropical storms, earthquakes, winter storms, wild land fires, severe weather, tornados, and hail. In the future, we may also introduce finer geographical resolution below the county level (i.e., at the zip code level) as well as potentially expand the index internationally.”

This kind of low level, modelled high resolution data could be just what our markets need to produce new products linked to this index. County level catastrophe bonds could be much more accurately modelled and therefore priced with this new data. It will be interesting to see how this new index gets used.

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