PCS launches industry estimates for large risk losses globally

Property Claim Services (PCS) has launched its second new service offering in as many days, announcing a service that will track global large onshore property losses of $500 million or greater, marking the loss data aggregator’s latest expansion into the specialty lines arena.

Just yesterday, PCS announced the launch of new catastrophe industry loss aggregation and indices services covering Australia, New Zealand and also the Southeast Asia region.

Today’s announcement is more focused on the kind of large specialty lines insurance industry losses where property is involved, with PCS promising to deliver a worldwide specialty lines loss aggregation and reporting solution named PCS Global Large Loss.

The solution has been developed in collaboration with the global reinsurance industry and is the result of significant market demand, PCS explained.

The PCS Global Large Loss service will be available from January 1st 2020 and will include industry loss estimate data for qualifying large onshore property loss events.

Qualifying loss events can include property damage, business interruption, and liability (with liability included only when there’s a property loss), with a reporting threshold of US $500 million applying for all new events.

The PCS Global Large Loss database includes loss events that date back 30 years and may include some smaller losses that were evaluated during the product development effort and have been included to make the data set more useful for PCS clients.

The database includes a number of open events including ADNOC, Ituango, and the 2017 Merck property loss caused by the NotPetya cyber attack.

“New product development is a labor of love for the PCS team, and we’re thrilled that insurers and reinsurers around the world have once again chosen us to meet their industry loss aggregation and reporting needs,” Tom Johansmeyer, head of PCS commented on the launch. “PCS Global Large Loss is further proof that when our clients ask us for help, we’re always ready with a robust, independent, and reliable solution.”

“As with our past solutions—and I can’t stress this enough—the real credit belongs to the clients who invested considerable time and effort to support us,” Johansmeyer continued. “The PCS team never loses sight of what that commitment means. That said, our team has done incredible work on PCS Global Large Loss. The amount of time and effort they invested was not trivial, and that pales in comparison to the long-term commitment we’re making to this sector.”

“I see every day what it means for a company to share data with PCS—both operationally and in terms of trust,” added Ted Gregory, director of operations at PCS. “We’re honored to have a worldwide community ask us to play the role of reporting agent for another specialty category.”

“In just a few years, PCS has added multiple new lines of business, each with a quick adoption rate and integration into our subscribers’ internal processes,” Gregory said. “We look forward to running PCS Global Large Loss in a live environment. There’s no substitute for continually proving your value. We know that we have to be consistent and reliable to be relevant and important to our market. Across our numerous indices, we intend to bring value to our subscribers every day. When a PCS team member wakes up in the morning, you can be sure this crosses his or her mind.”

The PCS Global Large Loss database service is expected to go live with as many as 60 events included, providing a robust set of data for insurers to benchmark against.

Then, whenever a new global large loss event occurs that fits the schema, PCS will add it to the data, collect or aggregate loss data and track the development of its industry loss estimates, reporting back to its clients.

These industry loss estimates could then be used for trading and risk transfer using industry loss based structres, such as industry loss warrants (ILW’s), or even catastrophe bonds.

We spoke with Tom Johansmeyer to get a better understanding of the reasoning for launching the new PCS Global Large Loss data service and what it could offer those looking for new ways to structure risk transfer or hedging solutions to protect against these kinds of industry wide loss events.

Data on these large property risk losses could be used within a trigger for risk transfer for specialty lines insurers with broad exposures and in particular the retrocessional needs of large and specialty lines focused reinsurance firms.

“I first heard about a client need for independent loss estimates for large risk losses around five years ago,” Johansmeyer said. “With our specialty lines methodology already tested by new events in both cyber and marine and energy, our clients have encouraged us to add more to the platform, and the demand for large risk losses has been significant.

“The feedback from the market has been both broad and deep, and we expect to see rapid adoption as soon as the product launches. We know that some folks may have questions about the loss history – and some existing events – ahead of the January 1 renewal, and I’d like to personally encourage the market to call me with any thoughts or questions.”

Of course, these industry loss data solutions have much broader use than in risk transfer alone and while we’re very focused on how they can help the capital markets and ILS funds expand their remit, the clear need for better quality data is a driver for PCS to launch an expanded range of services.

Johansmeyer continued, “While the need for an independent, robust, and reliable industry loss index for global large losses has been evident from many client conversations over the past year, I’ve also been focused on the benchmarking and mark-to-market use cases – not to mention solutions regarding collateral. With some recent large losses, we’ve seen wide ranges indicated by some insurers and reinsurers, and in some cases, the need for an independent source is palpable.

“It’s too easy to advance an agenda with large losses, and without an independent voice, it’s tough to spend time on what’s most important. With this new solution, we’re looking to help our clients understand significant losses – and to use our information to make better decisions with risk and capital every day.

“Yes, risk transfer is an important use case, but it’s only one of many that PCS Global Large Loss addresses.”