Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

PCS used as trigger source for first New Zealand exposed ILW transaction


Property Claim Services (PCS) has expanded its activities around the world with the introduction of new regions where its industry loss data aggregation and index reporting services are available and the market is responding, with new transactions being placed using PCS data as a trigger source.

pcs-logo-property-claim-servicesThe most recent success is the execution of the first industry-loss warranty (ILW) contract to feature PCS’s data for New Zealand as part of its range of triggers.

From the beginning of 2020, PCS added a range of new territories, including reporting industry insured loss estimates for catastrophe events occurring in Australia, New Zealand and across Southeast Asia.

PCS also added a service this year 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.

The first transaction using the new territories has now been placed, which we understand to have been a multi-region industry loss warrant (ILW) contract, likely as a source of retrocessional reinsurance, featuring the usual PCS territories, the addition of New Zealand for the first time and some other trigger sources.

We understand that this transaction represents the first use of PCS for New Zealand, but that’s not the only place the company is seeing an increasing amount of activity, in terms of being used within risk transfer triggers.

PCS is also finding its data being used in increasing volumes of ILW’s exposed to Japanese catastrophe perils, with ILW limit traded on PCS Japan now believed to be as high as $600 million and growing.

It provides a third-party alternative to unsupported ILW trigger data providers, such as Munich Re’s NatCat and Swiss Re’s sigma, as neither of the reinsurance firms officially sanction use of their research data as a determinant in whether ILW or other reinsurance risk transfer contracts face a loss or not.

Alternatives are good, especially when they are supported and available to respond to enquiries and have strict rules around reporting intervals and how long to aggregate data for, before calling a catastrophe closed.

PCS offers this in an increasing range of territories and perils now, even expanding to provide a service acting as a reporting agency for a parametric cyber risk transfer contract recently as well.

We spoke with Tom Johansmeyer, Head of PCS, who confirmed the use of PCS data to cover New Zealand perils, “It looks like this is the most rapid adoption we’ve seen of a new PCS region in an ILW trade, coming within two weeks of the launch of PCS coverage for New Zealand. We’re pretty sure it’s the fastest adoption of a new loss index by the ILW market in general, regardless of reporting agent.

“We’ve noticed the adoption cycle shortening for new PCS solutions. We used to like to see our first subscriber come within 60 days of launch. Given the importance of independent loss reporting and the historical infrequency, until recently, of new loss reporting regions and classes of business, we’ve understood that adoption should be a deliberate process.

“We set our 60-day goal with the launch of PCS Global Marine and Energy back in 2017. Since then, we’ve seen first subscription come usually within 30 days. In some cases, we’ve even had pre-launch results in anticipation of a solution going live. The importance of this dynamic isn’t lost on the PCS team. Faster adoption signals the high levels of trust we rely on to support the global reinsurance market.

“Personally, I still celebrate every new client and every newly expanded relationship as though it’s our first. Adoption means a lot to me, as it does to the entire PCS team.”

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