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Xactanalysis Insights and PCS

PERILS issues final loss estimate for European windstorm Joachim


PERILS AG, the independent Zurich-based company providing industry-wide European catastrophe insurance data and loss indices, has issued their fourth and final loss estimate for European windstorm Joachim, a storm which impacted Western Europe from 15 – 17 December 2011. The loss estimate has been reduced by €33m to leave a final property insurance market loss estimate for Joachim of €252m.

PERILS last updated on windstorm Joachim in June when they reduced the loss estimate by €4m to leave it at €285m.

The final loss estimate of €252m announced today is available in full resolution by CRESTA zone and by the property sub-lines Residential, Commercial, Industrial and Agricultural, said PERILS.

It’s interesting that PERILS loss estimate has been reducing for this storm, when we are perhaps more used to insured loss estimates rising over time as claims are assessed and the extent of damage becomes clearer. PERILS haven’t offered any explanation for this but it contrasts with their reporting for European windstorm Andrea which has seen loss estimates rise at each reporting interval. It can perhaps be explained by the fact that Joachim affected a large area of Europe, likely making claims assessment more difficult and initial modelled estimates potentially less accurate.

This storm is not expected to impact any catastrophe bonds or ILW’s given the low industry loss total. Most existing structures covering European windstorm have a higher industry loss trigger attachment point.

On the topic of industry loss estimates, a timely subject given the currently under-development PCS loss figure for hurricane Sandy, it is worth considering how the market might react were a much larger catastrophe event to result in a loss estimate that reduced over time. The potential for an initial loss estimate to breach a trigger point, suggesting cat bonds or ILW’s were facing a loss but then be reduced below the trigger level, is a scenario we have not yet seen. This is perhaps something that the cat bond and ILW market should prepare themselves for as it is entirely feasible that a complex catastrophe event could result in such a scenario.

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