PERILS estimates loss from European windstorm Joachim at €300m

PERILS AG, the independent Zurich-based company providing industry-wide European catastrophe insurance data and loss indices, has published an initial loss estimate for European windstorm Joachim, which struck western Europe from the 15th to 17th December 2011. PERILS data is used to measure losses for and their indices are used to set trigger points for many European windstorm catastrophe bonds and industry-loss warranties.

PERILS put their initial estimate of property insurance market losses for Joachim at €300m, with the majority of those losses in France and some in Germany and Switzerland. The estimate is based on gross loss data from primary insurance companies and doesn’t include any losses indemnified by the French CatNat government scheme.

PERILS will next updated this loss estimate on the 15th March 2012.

It’s hard at this stage to know whether this loss will affect any outstanding cat bonds or ILW’s, we’ll need to wait for the update in March to really understand that. However for any European windstorm aggregate cat bonds (such as Atlas VI, Queen Street IV or Tramline Re and others) this could become a qualifying event and so we could see ratings movements if that is the case. These cat bonds, and others which are exposed, use an index not the cash value of a loss to define a qualifying event. We’ll update you if we hear of any impact to cat bonds. For ILW’s it’s much more difficult to predict the impact as details of transactions aren’t widely publicised, however it seems that windstorm Joachim may have been severe enough to impact some of these contracts as a €300m loss could certainly be in the range of some smaller contracts.

PERILS also said that it will not report on windstorms Xaver and Yoda – collectively known as Berit – and windstorm Friedhelm, as the property market losses resulting from these events are expected to remain below their loss reporting threshold of EUR 200 million per event. Berit affected Denmark, Norway and Sweden in late November 2011, while Friedhelm predominantly affected the UK on 8 December 2011.

PERILS will announce at a later stage whether it will report on windstorm Dagmar (also known as Patrick) which occurred in late December 2011, and windstorms Ulli and Andrea which occurred in early January 2012.

Edi Held, Head of Sales & Products at PERILS, said; “The correlation between a positive North Atlantic Oscillation index and storm activity in northwestern Europe is well known and often leads to spatial and temporal clustering of winter storm events. This was observed in January 1990 with windstorms Daria and Vivian, and again in December 1999 with Anatol, Lothar and Martin. It appears that a similar clustering is also occurring in the winter of 2011/2012. Our aim is, therefore, to contribute to a better understanding of the resulting insurance risk by providing high quality catastrophe insurance data.”

We’ll update you as and when we hear anymore on the potential impact of this storm to any outstanding European windstorm cat bonds.