PERILS AG, the Zurich-based independent provider of industry-wide European catastrophe insurance data and loss indices, has issued an update on how their loss data and indices have been used by the reinsurance and catastrophe bond sector. When we last reported on PERILS they had just cleared $4 billion of limits placed using their data and tools. Now, at the 1st September, PERILS have reached $5.4 billion of limits placed through more than 70 transactions.
PERILS only launched back in December 2009, and in under three years they have grown to be used in numerous insurance-linked security, industry-loss warranty and derivative type re/insurance transactions. Catastrophe bond transactions we’ve seen using PERILS as a trigger and data provider in the last few months include Eurus III Ltd., Queen Street VI Re Ltd. and Mythen Ltd. (Series 2012-1).
At the 1st September 2012, PERILS AG industry loss data was being utilised for current transactions involving more than $3.5 billion of limits at risk. Of the capacity at risk, $1.96 billion (56%) is in the form of cat bonds, while $1.56 billion (44%) is in the form of private industry loss warranty (ILW) and derivative type transactions. PERILS said that more than half of the transacted capacity used the high-resolution data provided by PERILS to structure bespoke industry loss triggers. These tailor-made triggers result in a significantly lower basis risk compared to conventional industry-loss-triggered protection according to PERILS release.
Eduard Held, Head of Products at PERILS, commented; “The PERILS industry loss index has firmly established itself as the industry loss trigger of choice for transferring European storm risk to reinsurers and capital markets. It is also rewarding to see that more than half of the limits placed use the PERILS data granularity to structure protection triggers. Applying weighting factors by CRESTA zone, country or property lines of business significantly reduces the basis risk for industry-loss-based risk transfer. At the same time, disclosure requirements for the risk ceding party remain at manageable levels. This makes risk transfer using structured PERILS triggers a highly effective and efficient risk management tool.”
Luzi Hitz, CEO of PERILS, added; “Four years ago, the CRO Forum launched the PERILS industry initiative with the aim of making objective and independent Cat data more readily available. Since then we have made great progress. Our data are widely used in industry-loss-based risk transfer, risk assessment, Cat model validation and portfolio benchmarking. It makes us proud to see such a wide use of our services and helps to reinforce the fact that the work we do is of significant value to the industry as a whole.”