Swiss Re Insurance-Linked Fund Management

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PERILS exposure database updated for 2012, now includes UK flood


PERILS AG, a Zurich-based company providing industry-wide European catastrophe insurance data and loss indices and acting as a reporting agency for many European windstorm catastrophe bonds, has this morning released the 2012 update of the PERILS Europe Industry Exposure Database. With this update PERILS are also beginning their move to become the defacto European loss information and data provider for the new peril of flood which they said they would be including at the end of last year.

The updated PERILS Industry Exposure Database contains newly updated data for market-wide property sums insured for European windstorm for the following eleven countries: Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom. Also included for the first time in this release of the exposure database is information on property sums insured exposed to UK flood.

The exposure data is up to date as of the 1st January 2012. Granularity of the data is at a CRESTA zone, property occupancy type (residential, commercial, industrial, agricultural) and coverage type (content, building, business interruption) level. Information about prevailing deductibles has also been updated in the database.

PERILS give some insight as to changes in coverage across Europe for these perils. Compared to 2011, the total sums insured movement over all eleven windstorm markets combined is +3.4% (+2.5% at constant EUR exchange rates). Changes in country-wide sums insured vary between -7% and +12%. The year-on-year development in sums insured is mainly driven by movements in collected sums insured data and movements in market benchmarks they say.

In addition to the pure exposure information (which alone is extremely useful to the market), the PERILS database also contains loss data for windstorm and now also for future UK flood events where the overall industry loss exceeds EUR 200m. Loss data is available at the same level of granularity as the exposure information. Intensity measures, such as gust speed information, are provided on a CRESTA zone level.

The combination of up-to-date exposure data and market loss information based on identical sources and methodology enables users to validate European storm risk models and to perform exposure and loss market benchmarking. For insurance risk transactions based on industry losses such as industry-loss warranties and insurance-linked securities or catastrophe bonds), the database facilitates the defining of custom-made triggers resulting in reduced basis risk for protection buyers. It can also be used to carry out the risk assessment of such transactions, thereby ensuring consistency with the trigger definition.

The inclusion of flood risk data is going to be extremely interesting for many re/insurers with UK property exposures. It will be interesting to see how quickly this is adopted for use in ILW or cat bonds. PERILS will likely expand their flood coverage across Europe and it should receive a lot of attention in the other major insurance markets such as France and Germany where flood exposures are high.

Commenting on the announcement, Eduard Held, Head of Products at PERILS, said; “With the expansion of our database to include the peril of rain-induced flood for the UK, we will increase data availability and transparency for this key risk. Over time, our independent market data will lead to a better understanding of UK flood, a risk which has moved to the top of many insurers’ agendas, especially since the 2007 summer floods.”

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