PCS launches AUS, NZ, SE Asia industry loss estimates & indices

Property Claim Services (PCS) is greatly expanding its range of industry loss data aggregation and index reporting services to include Australia, New Zealand and also the Southeast Asia region, as it looks to capitalise on growing demand for its products.

PCS, a division of Verisk, said that significant global reinsurance market demand has led it to extend the catastrophe industry loss data aggregation methodology it uses in Japan to cover more territories in the Asia and Pacific region.

As of January 1st 2020, PCS will report industry insured loss estimates for catastrophe events occurring in Australia, New Zealand and across Southeast Asia.

Southeast Asia includes the countries of Brunei, Burma, Myanmar, Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam, PCS explained.

In order to qualify under the methodology used by PCS for these regions, future catastrophe loss events and those in the historical database, will need to meet an insurance industry loss threshold of US $3 billion.

PCS said it has decided to rapidly expand its product offering given the strong positive reception of its PCS Japan product, which was quickly adopted and found itself used for a number of industry loss warranty (ILW) trades.

PCS said that reinsurance companies and insurance-linked securities (ILS) fund managers have both confirmed the usefulness and effectiveness of this new, streamlined methodology for worldwide loss reporting and have shown an appetite to see more regions offered by PCS

These industry loss indices are designed primarily for reinsurance and ILS sector loss benchmarking, as well as for use in ILWs or other industry loss triggered transactions (such as catastrophe bonds).

PCS believes that use of unofficial and unsupported industry loss triggers has resulted in issues related to ILS fund valuation and trapped collateral following large catastrophe events.

Because of this it believes the market is increasingly looking for an independent, third-party and supported option, leading it to expand its product range significantly in recent years.

PCS is launching these new countries with four historical loss events in the database, some of which are still open to enable inclusion of any future loss development, such as the 2011 Christchurch, New Zealand earthquake, while other events in the database include the 2011 flooding in Thailand and the 2004 Indian Ocean tsunami known as the Banda Aceh event.

Commenting on the launch of the new catastrophe loss index services, Tom Johansmeyer, head of PCS, explained, “Our historical loss database is designed to address three market needs. First, it demonstrates our ability to put together loss estimates, which we believe differentiates us from other expansion efforts around the world. Second, it’s important to show what you plan to do going forward. Additionally, the database provides for better historical analysis. In 2011, for example, significant catastrophe loss activity occurred in Thailand, New Zealand, and Japan. Now, it’s possible to develop a more reliable global view of the loss year.”

“The historical database provides a foundation for introducing past losses that are still subject to development,” Johansmeyer noted. “In particular, the deterioration associated with the New Zealand earthquake losses of 2011 demonstrates the importance of keeping an event open for as long as necessary.”

PCS has kept catastrophe loss events open for as long as 20 months or more where needed, to ensure that the estimate given includes as much of the insurance market loss data as possible.

“Given our long track record in the United States, we were cautious when launching PCS Japan. After all, it brought a new approach to catastrophe loss estimation that’s a bit different from what we have in Canada, Turkey, and Mexico,” Ted Gregory, director of operations, PCS further explained. “Based on the early signs of success in porting our specialty lines methodology to catastrophe-style global terror events, we were confident in starting with Japan. Now, less than a year after our first estimates went live for Jebi and Trami, we see the importance of accelerating our entry into new markets.”

Gregory added, “Our clients need expanded support, and we’re honored that they come to us for timely, useful, and reliable solutions. Our goal is for our clients to choose PCS first because they see our work and our commitment. The PCS team continues to earn this privilege by demonstrating our dedication every day.”

The availability of robust historical data is extremely valuable, especially when from a comparable source serving numerous market.

But it is the availability of independent loss estimates and indices for this region that will be particularly interesting from a risk transfer perspective.

We asked Johansmeyer what has led PCS to seek this rapid expansion, to which he explained, “The feedback we’ve gotten from our clients in support of an expanded global PCS footprint has come in a number of forms. One client has said that he simply isn’t comfortable using informal reporting agents and data sources in ILW triggers. He’s encouraged us to grow into new areas, particularly those served by the ILW market, in order to help him help his clients.

“Another has indicated that, even though there isn’t much in the way of historical cat losses in Southeast Asia, the exposures certainly have his attention. And he wants to make sure he’ll be able to manage his risk and capital effectively if there’s a significant loss event. There are others, as well. What they have in common is that they needed help, and they all went to one place: PCS.”

But it’s not all about stimulating risk transfer and reinsurance deals such as ILW transactions and Johansmeyer is acutely aware of the important role accurate data on losses in these regions can play.

“With New Zealand, in particular, we’re less focused on ILW trading,” he explained. “The loss development from 2011 continues to pose challenges to our industry, and the lack of an independent loss aggregation solution for the region only further complicates an already difficult situation. When there’s an opportunity to help our clients out, we’re there. That’s what we’re in the market for.

“We’ve been able to move quickly in large part because of the significant vote of confidence we’ve received from the market on PCS Japan. I’ve never seen a new PCS product adopted so quickly, especially with ILW trading following so soon after a launch. The market needed a solution – quickly. I’m proud of the PCS team for being able to move both quickly and accurately to support our clients. And with Faxai and Hagibis following our launch, the relevance of PCS Japan is only reinforced. Everything has pointed to the need for further PCS expansion.”

As exposure grows rapidly in some of these regions, particularly in Southeast Asian countries, the availability of catastrophe industry loss data and estimates could help to stimulate better risk management for those assuming risk in the region, as well as global options for trading in those risks.

Ultimately data is a currency in risk circles and by providing services to help facilitate its ability to be trusted and used PCS is providing tools that the market can put to work in time to come, as risk premiums rise in some of these areas.