PERILS AG loss index usage grows to $1.55 billion

PERILS AG, the independent Zurich-based company providing industry-wide European catastrophe insurance data and loss indices, have published their third newsletter update to the market (the first published this year). In the newsletter they cover some recent announcements and update the market on usage of their loss index in risk transfer transactions.

The newsletter covers the recent announcements of their fourth and final loss estimate for the major European windstorm Xynthia and the recent updates to their Europe windstorm industry exposure database. PERILS now have 18,000 data entries in their industry exposure database and receive data from more than 65 companies giving them greater than 50% market coverage on the 1st April.

Usage of the PERILS loss index as a measurement scale for triggers in risk transfer transactions is growing too. Since the start of 2010, $1.55 billion of capacity placed either in the reinsurance market or the capital markets has utilised the PERILS index. $820m (or 53%) of that was in the form of catastrophe bonds and $730m (or 47%) was in the form of private transactions which PERILS says were mostly industry-loss warranty reinsurance or derivative arrangements. That equalled 24 transactions, 19 of which were ILS and 5 of which were cat bonds.

The catastrophe bonds which used PERILS AG as a loss index were:

• Successor X (Series 2010-1)
• Calypso Capital Ltd.
• Vega Capital Ltd. (Series 2010-1)
• Green Fields Capital Ltd. (Series 2010-1)
• Queen Street II Capital Ltd.

PERILS see themselves as a stabilising influence on the European catastrophe market as usage expands and it becomes more widely accepted. As an independent industry loss index provider in Europe they believe the market will particularly benefit from them after a major catastrophe where capacity can become scarce and prices rise.

PERILS say that they are looking at ways to expand their remit and are seeking feedback from the industry to this end. It’s possible that PERILS could expand to create a loss index for European flooding risks or even for earthquakes in exposed parts of southern Europe, perhaps they could even look to creat a casualty lines loss index as the ISO have done for the U.S.