PERILS AG industry loss data used for over $4 billion of risk transfer capacity

by Artemis on May 16, 2012

PERILS AG, the independent Zurich-based company providing industry-wide European catastrophe insurance data and loss indices,has published their latest newsletter today updating the market on the events of 2011 and the progress that PERILS have made. The last time we reported on PERILS progress they had just reached $3.18 billion of risk transfer capacity placed using their loss data and index. Now, after a number of further catastrophe bonds have come to market using PERILS they reached $4.039 billion of capacity placed at the 31st March 2012.

In the first quarter of 2012 PERILS data and indices was used to place $963m of capacity, with $542m of that being industry-loss warranties (ILWs) and derivatives and the other $421m being catastrophe bond capacity. PERILS says that at the 31st March there was $3.235 billion of capacity at risk which used PERILS data and indices, $1.709 billion was cat bonds and $1.526 was ILW and derivative capacity. The total risk capital placed using PERILS since the service launched in January 2010 reached $4.039 billion, $2.33 billion of which was ILW and derivative based with the other $1.709 billion being cat bond capacity. The graph below shows this split more clearly.

PERILS based capacity placed in ILW and catastrophe bond transactions

PERILS based capacity placed in ILW and catastrophe bond transactions

More than half of the total capacity placed with PERILS data and indices uses their data resolution to design bespoke trigger indices. This means that a country, CRESTA-zone and/or property line of business weighting is defined. In the case of an event occurring, weighting factors are applied to the PERILS loss data to determine the trigger value and whether the event causes any loss for the instrument. By using this approach it allows the transaction to be better aligned with the actual loss experienced by the protection buying entity.

PERILS is making good progress and has certainly become the leading industry loss data and index source for European windstorms. Last year PERILS announced that they would be including UK flood loss data in their service, this data was included in their database when they released their 2012 update back in April, it remains to be seen how that data will be used by protection buyers but we hope to see at the least ILW type instruments come to market to cover UK flood risks and this development certainly makes a UK flood cat bond much more feasible.

Other insights on PERILS progress include:

  • Number of data entries in PERILS Industry Exposure Database 2012 – 32,136
  • Number of countries covered by PERILS – 11
  • Number of perils covered: Europe Wind, UK Flood – 2
  • Market loss threshold for capturing Europe Wind and UK Flood events – EUR200m
  • Number of captured events – 9
  • Minimum number of PERILS loss reports for qualifying events – 4
  • Number of data providing national insurance companies – >80
  • Total of PERILS-based capacity at risk per 31 Mar 2012 – $3.2 billion
  • Total of PERILS-based capacity placed 1 Jan 2010 to 31 Mar 2012 – $4 billion
  • Share of PERILS-based capacity which uses structured triggers – 57%
  • Number of PERILS-based insurance risk transactions 1 Jan 2010 to 31 Mar 2012 –  61

You can download the full newsletter which also includes a look at the last European windstorm season here.

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