PERILS-based limits at risk up 22% to $4 billion over last year

Zurich based PERILS AG, an independent provider of industry-wide European catastrophe insurance data and loss indices, has seen continued strong usage of its loss data and indices by the reinsurance and catastrophe bond sector in the last twelve months. The total amount of PERILS-based limits at risk has grown by 22% over the course of a year to stand at $4 billion at the end of the first-quarter.

Since its launch in December 2009 PERILS loss data and industry loss indices have been used in numerous insurance-linked security, industry-loss warranty and derivative type re/insurance transactions, where it provides data for risk analysis and its indices are used within triggers.

The total amount of limits placed using PERILS data since its launch has now grown to $6.7 billion, which is an increase of 66% over the $4.039 billion of capacity placed at 31st March 2012.

Of the $4.016 billion of PERILS-based limits at risk in the marketplace at the end of March, $1.727 billion or 43% is related to private transactions $2.289 billion or 57% is attributed to 144A ILS transactions, so catastrophe bonds. Around 66% of the total capacity leveraged PERILS data to create structured industry loss triggers while the remaining 34% used the unweighted total event loss.

You can see the growth that PERILS has experienced in the chart below showing PERILS-based limits at risk at the end of the first-quarter from 2010 to 2013.

PERILS-based limits at risk

Here are some key figures on PERILS AG:

• Number of data entries in PERILS Industry Database per 7 May 2011 – 20,411
• Number of data entries in PERILS Industry Database per 7 May 2013 – 125,883
• Number of countries covered: B, DK, F, D, I, IRL, L, NL, N, S, CH, UK – 12
• Number of perils covered: wind, flood and earthquake – 3
• Number of captured events – 11
• Market loss of the M5.9 earthquake in Italy of 20 May 2012 – EUR 802m
• Market loss of the M5.8 earthquake in Italy of 29 May 2012 – EUR 436m
• Minimum number of PERILS loss reports for qualifying events – 4
• Number of data providing national insurance companies – >100
• Number of PERILS-based transactions placed since 1 Jan 2010 – >100
• Total of PERILS-based capacity placed 1 Jan 2010 to 31 Mar 2013 – USD 6.7bn
• PERILS-based capacity at risk per 31 Mar 2013 – USD 4.0bn
• Percentage of PERILS-based capacity based on a structured trigger – 66%

The PERILS team plan to focus on data coverage over the coming months, and said; “Over the coming month, the PERILS team will be fully focused on our data providers. We aim to visit as many as possible and give them feedback on the data we have collected from them. In addition, we will be visiting potential new data providers to ask them for their support to further enhance our overall market penetration. Our work in this area will not be finished until we have achieved the maximum market coverage possible.”

PERILS also said that it stands ready to broaden its scope to new catastrophe events and also into new regions of the world. CEO Luzi Hitz stated; “We receive many encouragements to further extend our systematic collection of Cat-exposed sums insured and Cat event losses into other areas of the world. We are willing and able to do so. However, this alone is not enough. Much more importantly, we need the support of the national insurance markets for us to collect the data.”

PERILS has experience strong growth since its launch and now covers three different types of catastrophe in European windstorm, UK flood and Italian earthquakes. As the addition of new perils to the database and indices become accepted by the market it will help to broaden diversification for ILS and reinsurance investors and offer new ways to transfer risk to cedents. We hope to see PERILS-based transactions continue to grow strongly as it is positive for the market as a whole.