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Xactanalysis Insights and PCS

PCS to launch Global Terror loss aggregation & index in Q1 2018


Property Claim Services (PCS), a Verisk Analytics business, has announced plans to launch a new loss aggregation solution for terrorism risks in the opening months of 2018, its latest industry loss data solution for global specialty insurance and reinsurance lines.

PCS Global Terror is expected to be launched in the first-quarter of 2018, and will provide industry loss estimates on single risk terrorism insurance loss events of at least $25 million, covering both physical damage and business interruption losses.

PCS reveals that at launch the historical database will include loss estimates for 14 terror insurance loss events, from 1992 through to the two most recent events in Turkey and Belgium, both of which PCS says are still under investigation.

“As part of the methodology, some terror events may already be covered and will be picked up by PCS in the United States, Canada, or Turkey. For these, the local property-catastrophe methodology will be employed (sometimes lower thresholds), while for the rest of the world, the global specialty methodology will be applied,” explains PCS.

The imminent launch of PCS Global Terror comes after the launch of its Marine & Energy Industry Loss Estimates & Index, which was followed by the launch of the PCS Global Cyber Index service in September 2017.

PCS has been adding to its well-used catastrophe loss data aggregation and risk transfer index services with forays outside of property catastrophe risks into the specialty insurance and reinsurance arena over recent years.

These new specialty lines loss aggregation and indices are now being closely examined as potential sources of trigger data for industry-loss warranty (ILW) contracts and other industry-loss trigger ILS or reinsurance solutions. In fact, the PCS Marine & Energy index has already been used for an ILW contract for the first time.

The insurance-linked securities (ILS) market and ILS funds are increasingly expanding into specialty risks such as energy and marine, cyber and also terrorism, and so the data, estimates and subsequent index of losses will be welcomed by the space, hopefully providing players with a new opportunity to participate in the terrorism arena.

Terrorism risks are already traded in the reinsurance and capital markets, however the lack of a robust and reliable trigger has meant that industry loss and index based terrorism risk transfer remains nascent.

The launch of a PCS Global Terror offering will provide a way for insurers to leverage the data within their own underwriting, while reinsurance firms will be able to transfer some of their own terrorism exposure on an industry loss basis.

At the same time the capital markets and ILS fund managers will be able to allocate capital to underwrite industry loss based terrorism risk, a diversifying peril for their portfolios, as well as leverage terror ILW’s as a hedging tool.

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