ISO to collect terror event data, help develop terrorism ILS solutions

ISO, a division of Verisk Analytics is working to assist the development of improved terrorism insurance solutions, by collecting, aggregating and analysing data on global terror events for the U.S. Department of the Treasury, the company has announced.

The U.S. Department of the Treasury is tasked with assessing the effectiveness of the U.S. government’s Terrorism Risk Insurance Program (TRIP), a platform established almost 15 years ago requiring insurers to offer terror risk solutions in light of commercial property/casualty losses following an attack.

Artemis reported earlier this year that Verisk Maplecroft and PCS had been working together in order to develop a parametric-style trigger for terror ILWs, as the trend of more frequent but less severe terror attacks intensifies.

“As we’ve been exploring the global terror ILW market, we’ve seen a tremendous need for more data and analytics. The latest development with ISO shows the true Verisk-wide commitment to helping insurers and reinsurers improve terror risk management – and generally optimise their use of capital,” said Tom Johansmeyer, Assistant Vice President, Reinsurance Services, Verisk Insurance Solutions.

In recent times terrorism attacks have increased in frequency, particularly in Europe, underlined by the Paris attacks towards the end of 2015 and the more recent attacks in Turkey and Brussels.

The need for adequate and affordable terrorism risk insurance solutions is apparent, with the increased interconnectedness and rising asset values of the world today meaning potential losses are heightened when an attack occurs.

However, with such a complex risk there is a real need to understand the impacts of past and future events of varied sizes and in a range of locations, in order to develop suitable triggers that can be used in products that protect against terror events.

President of ISO Solutions, Beth Fitzgerald, has advised that collecting and analysing vast amounts of terrorism data is a natural fit for the company, as it develops and maintains an extremely large insurance information database.

“We’re honoured to collect, report, and manage data about terrorism insurance on behalf of the U.S. Department of the Treasury. It’s a testament to the knowledge and dedication of our staff and to the confidence that regulators have in using the data we collect because of our strong focus on quality,” said Fitzgerald.

ISO explains that for the first collection of information under Section 111 of the Terrorism Risk Insurance Program Reauthorization Act of 2015, the U.S. Department of the Treasury is requesting insurers to submit relevant data.

“With plenty of US ILWs being written worldwide, ISO is well-positioned to help insurers and reinsurers worldwide better understand their risk in a time of heightened global terror activity. At the same time, we have other projects in progress to help on a global scale,” said Johansmeyer.

This includes the previously mentioned work between Verisk Maplecroft and PCS, along with work undertaken by sister company and catastrophe risk modelling firm AIR Worldwide, to expand its Terrorism model to cover more territories globally.

“The shift in event magnitude will make effective and flexible modelling more important than ever and unique trigger structure crucial.

“Above all, access to data will be the foundation for all risk and capital management efforts related to terror – which is why ISO’s new initiative on US data collection should be a model for pools and schemes worldwide,” advised Verisk Maplecroft’s Associate Director, Helen Hodge.

In order to develop parametric-style triggers for terror ILWs and other beneficial solutions, sound, reliable and accurate data is key, as with any exposure. And the fact that the U.S. government has called for a trusted data provider like ISO to collate, analyse and share vast amounts of data on terror events is a step in the right direction.

“Verisk Maplecroft’s series of Political Risk indices, (derived in part from the terrorism database) provide a consistent global basis to quantify and evaluate key insurance coverages such as terrorism (mapped to 1km²), civil unrest and wider political violence. The use of these indices in parallel with terrorism data provide a comprehensive basis for managing political risk exposures,” continued Hodge.

Insurers, reinsurers, and even insurance-linked securities (ILS) players will undoubtedly be eager to utilise increased and improved data on global terror events to help them offer more adequate and profitable solutions, particularly as the threat of attacks appears to be on the rise.

Improved analytics and data surrounding terror events should also give re/insurers and ILS managers and funds greater confidence in offering products, as currently there’s a real risk of overexposure with terror products, or a complete lack of options in certain places.

“This summer, AIR will expand its deterministic terrorism capabilities to provide insurers with the ability to model and manage their exposure to terrorism in countries around the world.

“Through collaboration with our sister companies, Verisk Maplecroft, PCS, and ISO, Verisk Analytics will be well positioned to assist the industry in managing the risk of terrorism globally. AIR looks forward to extending our capabilities and help deepen the level of analysis within the industry,” said AIR Worldwide Risk Consultant, Jonathon Green.