PCS marine & energy industry loss estimates & index launched

by Artemis on April 5, 2017

Property Claim Services (PCS), a Verisk Analytics business, has launched a new service offering non-elemental historical industry loss estimates for the global marine and energy insurance and reinsurance sector, as well as a risk-transfer index to facilitate transactions.

Jubilee oil field FPSO Kwame Nkrumah image from Tullow OilPCS adds to its well-used catastrophe estimates and risk transfer index service with its first foray outside of property catastrophe risks into the energy and marine insurance and reinsurance arena.

With the insurance-linked securities (ILS) market and ILS funds increasingly expanding into specialty risks such as energy and marine, the data, estimates and resulting index of losses will be welcomed as a new opportunity to transact energy and marine risks on an industry loss basis.

The new loss aggregation service from PCS will offer industry loss estimates for ocean marine and offshore energy loss events that are deemed likely to exceed $250 million, with worldwide coverage.

“Our clients have been clear: The industry needs a loss aggregation solution for global marine and energy,” explained Tom Johansmeyer, assistant vice president, PCS Strategy and Development. “We’ve invested considerable time and effort to launch PCS Global Marine and Energy based specifically on this feedback. With a consistent, rigorous approach to loss aggregation, our new solution should help companies understand losses and transfer risk more effectively. The market spoke, and we listened. We’re happy to provide the help the industry has sought for so long, and we look forward to working with our clients further so they can maximize their use of this solution.”

“Loss aggregation is important beyond property catastrophe, and we’ve developed a process focused on the specific needs of this sector while remaining consistent with the retrospective view PCS takes on loss events,” added Ted Gregory, director of PCS Operations. “As with any event, we’ll stick to a defined methodology to arrive at consistent, independent, and reliable industry loss estimates.”

PCS Global Marine and Energy already has estimates in place for several key loss events, including Deepwater Horizon, Costa Concordia, Gryphon Alpha, and Jubilee, as well as others which also affect global reinsurance and ILS interests, such as Tianjin and the SpaceX launch explosion.

PCS expects that a full historical database-dating back to 2009 will soon be ready for use, featuring data from reviews of insured loss events likely to exceed $250 million, across energy physical damage, marine hull, marine cargo, and liability.

The process to get the global marine and energy index and loss estimates service ready involved significant work with the industry, including direct market feedback that showed the need for disciplined, independent, and reliable industry loss estimates for marine and energy, PCS said.

Johansmeyer told Artemis; “Throughout the process of developing PCS Global Marine and Energy, it became clear just how interested the market has been in loss aggregation for these lines of business. The feedback we received along the way was both helpful and extremely valuable to us. Effective loss aggregation solutions can only come to market when supported by strong and broad collaboration.

“We’re now looking into other specialty lines that could benefit from industrywide global loss aggregation and plan to build out this platform alongside our property-catastrophe solutions. And as we do so, we’ll be sure to work closely with our clients to deliver a platform that meets their needs and facilitates more effective risk and capital management.”

The PCS Global Marine and Energy service will provide a third-party view of the industry loss for large non-elemental events around the world. With the resulting index able to facilitate reinsurance and alternative risk-transfer (ILS and catastrophe bond) transactions on an industry loss trigger basis.

Signaling the importance of such developments for the ILS market, CEO of ILS investment specialist Leadenhall Capital Partners Luca Albertini, commented on the launch to Artemis; “We very much welcome this development and the marine and energy market need some transparent and sustainable indexes given the volume of transactions currently traded. We have supported PCS research and currently believe this index could be of use for transactions going forward.”

ILS fund managers such as Leadenhall are already investing in marine and energy reinsurance and retrocession. The availability of an industry loss index that can be used as a trigger will enable ILS capital to further expand into these specialty risks.

“Global marine and energy loss aggregation provides direct benefits to reinsurers, ILS funds, and end investors. Property-catastrophe was never intended to be the last stop for the ILS space. Rather it was supposed to be the first of many. While other lines of business have made it into the ILS space, it’s difficult to drive sustainable expansion without an industry loss index. We hope that PCS Global Marine and Energy can help the market source and trade some original risk, and our strategy is focused on taking this concept further,” added Johansmeyer.

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