PCS launches industry loss index & estimates for Latin America

Property Claim Services (PCS) will now provide industry loss data aggregation and index reporting for the entire Americas, from Canada to Argentina, with the launch of a Latin America service in response to client demand.

PCS, a Verisk Analytics business, already provides loss aggregation and reporting solutions for property catastrophe risks across the United States, Canada and Mexico, so adding the rest of Latin America gives it a full suite of solutions for the Americas.

Demand from PCS clients for greater insights into insurance and reinsurance market losses related to the 2019 Chilean riots has accelerated the launch of this new PCS Latin America offering, which has come to market four months ahead of the original schedule.

PCS LatAm consists of an industry loss index focused on Latin America and will provide independent estimates on events with industry insured losses of at least US $500 million across all natural catastrophe and man-made perils.

PCS said that the “top-to-bottom scope of PCS in the Americas” helps insurance and reinsurance market participants to “greater flexibility in risk and capital management.”

Given the all-encompassing Americas industry loss data and index offering, PCS can now help insurance and reinsurance firms with greater visibility of major catastrophe and man-made loss events that cross border as well, which could lead to new risk transfer opportunities.

In addition, the global coverage that PCS provides with its industry loss data solutions means that protection buyers and sellers have increasingly global options for securing industry loss warranty (ILW) protection, which the company hopes could reinvigorate the market for global ILW and industry loss based retrocessional reinsurance coverage.

PCS began its expansion plans for Latin America as it was seeing “significant and compelling client demand” the company said.

Tom Johansmeyer, Head of PCS, further explained, “Our clients came to us and said they wanted a PCS solution for Latin America, and they committed to supporting us in developing the loss-reporting platform and driving adoption.

“Because of the ongoing effort we invest in our relationships and the global reinsurance market as a whole, we’ve become the first stop for companies that need to understand risk and losses in regions and classes of business around the world.”

Ted Gregory, director of global PCS operations, added, “Client demand for loss information from these recent events in the region contributed heavily to our early launch of PCS LatAm.

“We had planned to launch the platform later this year, but through close and continued discussions of the market, we understood just how acute the need for independent loss estimates had become. With that in mind, we shifted our focus, as a team, to PCS LatAm to be able to meet an urgent need for our clients. We’re excited to be continuing our mission to expand our independent and globally trusted services.”

PCS LatAm has already seen prelaunch subscriptions, demonstrating adoption by the market as stakeholders look to the new source of data to deliver greater risk transfer flexibility.

Johansmeyer explained that transfer discussions are already in progress and said it won’t take long for the first PCS LatAm ILW to come to market.

“We entered this market for a reason: Our clients need our help. It’s an honor to know that we’re the first call. And we know that it’s an honor we need to continue to earn every day. Our team will always demonstrate through our thoughtfulness, responsiveness, and execution that we deserve the market’s confidence and trust in expanding to new regions and classes of business,” he said.

PCS’ new Latin America service already includes data on five historical events of at least US $500 million, as well as the 2019 Chilean riots, which PCS will continue to report on as a still-developing industry loss.

PCS also said it may review historical losses below the US $500 million threshold and add them to the database as an additional source of value for clients.

“For every new loss-reporting platform we launch, the historical loss database is designed to address three market needs. We investigate past losses to demonstrate our ability to access sufficient data from across the market, which clearly differentiates us from other loss-reporting agency expansion efforts around the world. Further, historical losses support better historical analysis,” Johansmeyer explained.

Adding that, “The historical database provides a foundation for introducing past losses that are subject to further development. The 2019 riots in Chile are still early in the reporting cycle, and the industry still has a lot to learn about the insured losses associated with the event. In particular, facultative losses could take a while to evolve; and based on our current estimates, a small number of facultative losses are responsible for at least one-third of the total industry loss.”

PCS LatAm is available immediately and the company said the first resurvey of the Chilean riots is expected to come 90 days following the launch of the platform.

We asked Johansmeyer for his outlook for ILW trading on the new PCS LatAm index.

“What’s interesting here is that we’ve shown the market – again – that we can develop and initiate loss aggregation and reporting quickly after an event that’s relevant to the global reinsurance industry. And this isn’t just reporting on the critical loss of the day. As with all our loss reporting solutions, we’ve gone live with historical catastrophe estimates, as well. That’s a rarity in the loss aggregation world, and for us, it’s now a standard part of how we develop and launch. We did this with PCS Japan, as well, not to mention our subsequent expansion into the Asia-Pacific region,” he told us.

Further explaining, “We’re optimistic about how the market will respond to PCS LatAm. There’s already talk of ILW trading, which speaks to the need for coverage in Latin America. When we launched PCS Japan last year, the ILW market adopted it quickly, and by our estimation, there could be more than US $600 million in limit traded against our index. And with our subsequent expansion, we’ve not only seen trading on our index for New Zealand but found our coverage of Australia has provided a unique opportunity to share lessons we’ve learned about hail and wildfire in other markets with the local insurers affected there.”

The increasingly global industry loss data reporting services of PCS provide protection buyers and markets with new options for hedging their risks, trading in industry-loss based reinsurance instruments such as ILW’s and could even help to drive new industry-loss based catastrophe bond issuance as well.