PERILS AG has launched an industry exposure database for three Asian countries, Indonesia, the Philippines and Thailand, but instead of being reported exposure from insurers, the company has aggregated information from stakeholders, including reinsurers, brokers and modelers to create the database.
As a result, these are effectively industry exposure levels that are extrapolated from the information available through those higher up the risk transfer chain, or commanding deal-flow, rather than confirmed through direct reporting from insurers.
Collecting sufficient data to enable a meaningful view of exposure from primary insurers would always be challenging in these regions, but reinsurance firms and brokers will have been able to provide a reasonable view to make this product viable.
For each of these countries, PERILS now provides the market-wide property sums insured exposed to earthquake, tropical cyclone (typhoon) and flood through the database.
The sums insured information is broken down by CRESTA zone, property line of business and the coverage types of building, contents and business interruption, across each country included.
On top of this, insurance coverage conditions, such as the applicable deductibles and loss limits per peril are included.
PERILS said that this has numerous applications, including in the calculation of industry loss-frequency curves using probabilistic catastrophe risk models.
The data can also be helpful in the pricing of industry-loss-based risk transfer products, such as Industry Loss Warranty (ILW) contracts or catastrophe bonds.
It’s also helpful for insurance and reinsurance entities looking to compare modelled market losses with actual market losses, for the purpose of model calibration, as well as in the benchmarking of portfolio-specific sums insured versus market sums insured.
Darryl Pidcock, Head of PERILS Asia-Pacific, commented, “The Southeast Asian region continues to grow in terms of both natural catastrophe exposure and associated losses. PERILS is pleased to be able to provide an industry exposure database for these respective markets which also supports regional government and industry initiatives such as NatCatDAX and ADRIFI. We also plan to engage with the local primary insurers to offer an independent industry loss reporting service. This has the potential to enhance the availability of natural catastrophe risk capital through Insurance Linked Warranties or even Cat Bonds in Indonesia, the Philippines and Thailand as the availability and reliability of exposure and loss data increases.”
Luzi Hitz, CEO of PERILS, added, “The expansion of our territorial scope in the Asia Pacific region to five countries, including Australia and New Zealand, is an important step for PERILS. We are particularly grateful for the strong support from key industry stakeholders in the region which has enabled this. During the process we observed that views of industry-level exposures can vary considerably from one source to another. By our novel approach of evaluating and testing these different market views to come up with a “Consensus IED”, we are convinced that we contribute to a better and more realistic assessment of industry exposures in Indonesia, the Philippines and Thailand. This information is fundamental to understanding catastrophe risk in any market, and it is particularly valuable in these highly catastrophe-exposed Southeast Asian markets.”
As data becomes more readily available and its analysis easier, extrapolating exposure from reinsurance sector information should become more viable in many emerging regions and economies, helping insurers and reinsurers, as well as ILS funds, to gather more certainty before deploying capital there.