PCS to launch Japanese industry loss estimates & index

Property Claim Services (PCS) is set to expand its range of industry loss data aggregation and index reporting services to include non-marine catastrophe losses in Japan, in response to demand from its client base.

PCS provides estimates on catastrophe losses in a number of regions around the world, as well as specialty lines loss aggregation and loss index services, which are widely used by insurance, reinsurance and insurance-linked securities (ILS) fund interests.

This latest launch is the first PCS product in Asia and sees the company expanding with the first new catastrophe industry loss focused product launch since 2016.

After learning about the new PCS Japan products impending launch, Artemis spoke with PCS to find out a little more about what this product will offer.

The PCS Japan product will launch soon, currently the company is setting up the necessary internal processes and data store, with a formal launch expected in the coming weeks.

To derive the estimate numbers for non-marine catastrophe industry loss events in Japan, PCS is working with a streamlined approach to provide a service that will add value to its client base and prospective clients.

The result will be a single industry loss estimate figure being reported for all Japanese catastrophe and severe weather events that cost the insurance and reinsurance industry more than $2 billion.

PCS is already tracking the 2018 catastrophes that hit Japan, a number of which have driven more than a $2 billion industry loss each.

In 2018 Japan was hit by typhoon Jebi which is estimated as a roughly $9 billion industry loss, typhoon Trami estimated to have cost the industry $3 billion, and the severe rainfall and flooding that is estimated to have cost roughly $2.7 billion. These industry estimates are not PCS’ data.

All of these catastrophe events would have qualified for reporting under the new PCS Japan industry loss index product and estimates will be included in the product when it is launched.

PCS told Artemis that it will make some historical data available under the new PCS Japan service and that estimates will be subject to quarterly updates.

The PCS Japan methodology will not be the same as is used in the United States for catastrophe loss events. Instead it will be similar to the one PCS uses for its specialty products, using an expert panel from the industry to provide loss estimate inputs.

A panel of risk-bearers from the insurance and reinsurance industry will provide their views on each industry loss event and PCS will aggregate and synthesis the results from there, coming out with its single number for non-marine catastrophe industry losses across.

PCS said that the PCS Japan product and methodology is a direct response to demand from existing clients, who desire a solution that can be used to help in hedging Japanese catastrophe event exposures.

The industry loss estimates and resulting index can be used as a trigger input for catastrophe bonds, industry loss warranties (ILW’s) and other structures providing reinsurance or retrocessional protection.

Commenting on the launch, Tom Johansmeyer, Co-Head PCS told Artemis, “Several clients approached us to launch an industry loss aggregation solution for Japan. They indicated a strong interest in a PCS solution as soon as possible. We’ve reviewed the methodology and historicals with key market stakeholders to confirm that our approach meets their needs. While not exactly what PCS is doing in North America, our unique approach for Japan should help bring more original risk to market and, more importantly, help our clients continue to manage their risk and capital more effectively.”

Alex Mican, Senior Product Development Manager, PCS, added, “After the the catastrophe events of 2018, our clients reached out for a solution. It’s been an honor to collaborate with the leading market players to help develop an industry loss index that meets their specific needs. Development for Jebi and Trami is ongoing, and we’ll be working with the market to develop our next round of estimates in due course.”

PCS said that full availability of the new PCS Japan product will be coming soon.