PCS launches catastrophe industry loss service for Turkey

Property Claim Services (PCS) is expanding internationally and has today announced the launch of PCS Turkey, to provide catastrophe loss aggregation services and industry loss estimates for events that occur throughout the country.

It’s a move which will bring the industry loss estimate, and its potential for use within transactions such as catastrophe bonds and industry-loss warranties (ILW’s), to Turkey for the first time as well as perhaps opening up a stronger pipeline of Turkish risks for ILS investors.

Turkey has a significant exposure to major earthquakes, with insured property values rising rapidly and the country also has reasonably high earthquake insurance take-up rates. That could make a PCS Turkey industry loss trigger attractive to insurers or reinsurers operating in the region.

Insurers will be able to use PCS data for an industry loss Turkish quake cat bond in future, as well as for ILW transactions, as part of their reinsurance tool kit. Global reinsurance firms, some of which have significant exposure to Turkish earthquake risks, will be able to leverage the PCS Turkey service and data for cat bonds or ILW’s for retrocessional needs.

PCS, the division of Verisk Analytics that provides reports and insured loss estimates on U.S. catastrophe events which are used widely in insurance, reinsurance and catastrophe bond or ILS markets, is working alongside the Istanbul Underwriting Center (IUC) to launch PCS Turkey today.

The new service will deliver industry wide estimates of insured losses for catastrophe events occurring throughout Turkey from today. The estimates published by PCS Turkey can be used by insurance, reinsurance and insurance-linked securities (ILS) players as a risk and capital management tool and within risk transfer transactions.

The PCS Turkey service will use base its estimates on projected ultimate losses reported by insurance industry participants, in order to aggregate industry wide loss totals as well as estimated claim counts by CRESTA zone for events caused by all natural and man-made perils.

From today, catastrophe events occurring in Turkey which have over $10m of projected insured property losses will receive catastrophe designation from PCS. After that the events enter PCS’ reporting process, with updates distributed to subscribers according to a pre-defined schedule.

The reports on catastrophe event in Turkey will include industry wide loss estimates for:

• residential: building and contents
• auto: residential and commercial
• commercial: building, contents, and business interruption

In order to establish whether a catastrophe event in Turkey should be reported on, PCS and IUC team members will review events deemed likely to reach the $10m threshold to decide whether the market should be contacted to supply projected ultimate loss estimates.

If the claim types and volume of claims resulting from an event suggest that it could be a catastrophe, PCS Turkey will issue a catastrophe designation bulletin, with reports available in both Turkish and English.

After an event is designated as a catastrophe by PCS Turkey, PCS and IUC will review the submitted claims data to develop catastrophe loss estimates, which will be communicated through bulletins in a process similar to PCS in the U.S. and Canada.

Each event will be resurveyed by PCS Turkey until it considers an event closed, which is when loss development has stabilised and no significant unknowns are considered to exist that could substantially affect the overall industry wide insured loss.

Commenting on the launch of PCS Turkey, Joe Louwagie, assistant vice president of PCS, said; “I’m honored to have the opportunity to collaborate with the IUC on a new loss aggregation service.

“In addition to developing insured loss estimates and sharing best practices from around the world that will help insurers in Turkey manage their operations more effectively, the launch of PCS Turkey provides a much needed opportunity to help the global reinsurance and insurance-linked securities community with respect to transferring risk more effectively and optimizing capital deployment.”

“Working with PCS, IUC has the opportunity to provide an even greater set of services to the Turkish insurance market, demonstrating our commitment to our clients across the country,” added Menekşe Uçaroğlu, general manager at IUC. “We look forward to helping the industry improve how it manages catastrophe response, risk, and capital to help improve both customer service and shareholder value.”

The launch of PCS Turkey is a positive development for the Turkish insurance market, as well as for international reinsurers and insurance-linked securities (ILS) players.

The availability of loss and claim data on catastrophe events in Turkey will benefit participants in that market, as well as offer the ability to utilise new risk transfer tools based on industry loss triggers, including catastrophe bonds and ILW’s.

It will be interesting to see how PCS Turkey is used and whether the ILS market begins to see new deal-flow as a result of the availability of industry loss data and reports on catastrophe events that occur there.

As Turkish earthquake insurance penetration grows and insured values continue to increase, the country could become a source of much greater source of diversification potential for ILS managers and their funds.