Industry exposure database for Canada launched, first ILW transacted

The first insurance industry exposure database for Canada has been launched by Catastrophe Indices & Quantification Inc. (CatIQ) in partnership with PERILS AG and the first industry-loss warranty (ILW) transaction has been completed on the back of this development.

At the moment, the industry exposure database contains year-end estimates for 2016 and 2017 of Canadian industry property sums insured by: Canada Post Forward Sortation Area (FSA); Peril (such as windstorm, hail, fire, flood, sewer back-up, earthquake and volcanic eruption); line of insurance business (personal, commercial, and motor hull); and coverage type (building, vehicle, contents, business interruption and additional living expense, where applicable).

CatIQ said that the industry exposure database has been constructed based on detailed exposure submissions from a majority of insurers in the Canadian market. Leveraging the established PERILS AG methodology, CatIQ’s industry exposure database will be updated annually each spring from 2019.

Additionally and effective immediately, CatIQ will be producing industry loss estimates at the FSA level thanks to data from participating insurers for the same perils, lines of business and coverage types as detailed above, for any catastrophe that results in an insurance and reinsurance industry loss greater than C$300 million. Updated loss reports will be released t three months, 6 months, 1 year and, if industry loss exceeds C$500 million, 2 years after the catastrophe event.

CatIQ said that it has already been selected to be a reporting agent for one industry-loss warranty (ILW) transaction, likely a retrocessional reinsurance arrangement we assume.

The company will be hoping for further traction, but will of course face competition for reporting agent opportunities from PCS which also operates and provides catastrophe estimates in Canada.

CatIQ said that it will provide industry loss estimates in August 2018 for the 2016 Fort McMurray Fire and a damaging windstorm that struck southern Ontario and Quebec in early May 2018.

Joel Baker, CEO of CatIQ, commented on the launch, “The release of CatIQ’s Canadian IED and Loss platform will provide immense value to insurers, reinsurers, brokers and modelers that European and Australian markets have long benefited from via PERILS’ services.”

Baker added that, “the unprecedented level of detail available in the platform will drive improved modelling, benchmarking and risk-transfer solutions that will definitely contribute to market efficiency. In fact, CatIQ has recently been selected as a reporting agent for an ILW, and we expect more such transactions now that the IED has been released.”

Luzi Hitz, CEO of PERILS, also said, “We are delighted to have partnered with CatIQ to establish the IED for Canada. By providing both industry loss and industry exposure data, we are essentially creating a situation where one plus one equals more than two. The industry exposure data provides an ideal benchmark against which industry loss data can be compared. The resulting damage ratios can then be correlated with physical intensity measures, making it possible to derive valuable information about the damageability of insured property assets. This trove of information is a crucial component of any Cat risk model. I am therefore convinced that the addition of the IED to CatIQ’s loss data will benefit the entire Canadian re/insurance market.”

CatIQ will offer access to the industry exposure database at no charge to primary insurers that participate in data provision and the database and loss information will also be made available through PERILS service, taking the number of territories it covers to 16.

The availability of insurance and reinsurance industry loss and exposure data can help to stimulate transaction activity in ILW’s and also other risk transfer structures. The addition of a CatIQ service for Canada will expand the choice available to ceding companies.

The C$300 million threshold for reported catastrophe events is high however, which would mean that the estimates produced are less suited to any aggregate industry-loss based or ILW covers.

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