PERILS in Australia enables new risk trading possibilities: Luzi Hitz, CEO

by Artemis on September 20, 2016

PERILS AG, the provider of industry-wide catastrophe exposure, industry loss data and indices, recently announced its expansion into Australia, a move that Chief Executive Officer (CEO), Luzi Hitz, says will open up new trading possibilities and that has received strong market support.

Perils logoSpeaking to Artemis around the 2016 Monte Carlo Reinsurance Rendezvous, Luzi Hitz of PERILS AG provided some insight into the extension of its market coverage to include Australian bushfire, earthquake, flood, hail, and tropical and extratropical cyclone risks, and how it’s been received by the primary Australian marketplace.

“We have received very strong support from the Australian Market. While we are not allowed to disclose the names of specific companies or the precise market share, we can say that our market coverage is between 60 to 80% of the market. This provides a very sound basis from which to extrapolate to the 100% market figures for exposures and event losses,” said Hitz.

Global reinsurers, insurance-linked securities (ILS) players, and insurance and reinsurance brokers that operate in the region have also responded well to the availability of estimates of industry losses for Australia, explains Hitz.

“We have been urged by various reinsurers, ILS funds and re/insurance brokers to cover Australia for a while now. Australia is one of the biggest Cat capacity buyers in the world, and as such new data to manage the risk is very much welcomed. The data also open up new possibilities to trade,” continued Hitz.

PERILS’ collected and distributed loss data for the range of aforementioned Australian risks is sure to increase the understanding of exposures for insurers, reinsurers, ILS players, and brokers, which in turn will enhance the tradability of each exposure and provide market participants with greater opportunities.

But at the same time it’s important to remember that insurers, reinsurers, and ILS funds/managers that operate in the space will be able to use the information obtained and dispersed by PERILS as a means of validating their own catastrophe risk model assumptions, utilising real event and loss data.

Furthermore, the data can be used for a range of applications, including industry loss warranties (ILWs), catastrophe bonds, and other insurance or reinsurance linked securities (ILS), a notion expanded on by Hitz.

“From what we can see, we think the demand will be high on the retrocession side. For many reinsurers and ILS funds Australia Cat is a key feature on their risk landscape, making retrocession an attractive risk management tool. But this does not mean that primary insurers do not also benefit. It is often the case that if the retrocession market is liquid, it generates a positive knock-on effect for reinsurance buyers too. It’s one single food chain after all,” said Hitz.

Furthermore, Hitz told Artemis that multi-peril aggregate catastrophe bond issuances would also benefit from the use of its Australian data sets, stressing that this is “absolutely” one possible use for the data.

With the addition of Australia PERILS now covers 15 territories, with the recent extension being the first in the Asia-Pacific region. However, the company is keen to expand further across the region, explains Hitz.

“Our aim is to cover territories where our data are most relevant. This includes not only markets with high Cat PMLs, such as Australia or Turkey, which we added last year, but also markets with a low Cat insurance penetration where PERILS data can help to close the protection gap. This is why we joined the Singapore-based Natural Catastrophe Data and Analytics Exchange (NatCatDAX) Alliance led by the Institute of Catastrophe Risk Management (ICRM) at Nanyang Technological University earlier this year with the aim to cover a number of Southeast Asian markets as well as Taiwan,” concluded Hitz.

Read all of Artemis’ Monte Carlo Rendez-vous coverage here.

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