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Original Risk: A Society for Change Agents

The ongoing, innovative evolution of PCS: Tom Johansmeyer


Over the last couple of years, Property Claim Services (PCS) has innovated and evolved to offer an enhanced, client-centric global strategy designed to serve both existing and new client needs.

Tom Johansmeyer, PCSIn light of a flurry of market activity, Artemis spoke with Tom Johansmeyer, Co-Head of PCS, about the firm’s undertakings over the last couple of years, its thinking behind some of its most recent developments, and what the future might look like for PCS.

Johansmeyer explained that over the past few years, a number of things have come together.

“First, our balanced approach to PCS is reflected in our priorities. Rather than double down on the U.S. insurance market or start chasing overseas opportunities (each at the expense of the other), we’ve been able to find a path forward that reinforces our value and importance in the United States and Canada while also identifying a wide range of expansion markets for us.

“As to the latter, we’ve focused heavily on client feedback and genuine market engagement. There are two ways to ask for feedback, right? One is, ‘On a scale of one to five, please tell us how amazing we are, with one being better than a cure for the common cold and five being a multiple-entry visa to Valhalla.’ The other, ‘Hey, we’ve had a deep working relationship for a long time now. We’ve started to get along pretty well. Take all that out of the equation. Without regard to my feelings, let me know how PCS can change and grow to make a real difference for you. What do we need to fix, and what do we need to start?’

“We’ve done the latter, and it yielded the information and ideas we needed to develop and implement a truly client-centric global strategy for both existing product improvement and new market entry.

“So, with all that as context, we were able to put together a two-pronged strategy that involves firming up the existing stuff while also addressing a new set of client needs. And along the way, we’ve found out that questioning some long-held beliefs has made a difference. And innovation in one part of the business could support us in others,” said Johansmeyer.

Discussing innovation more specifically, Johansmeyer explained that the launch of the PCS Global Specialty Lines reporting platform was where it all began. Discovering that the methodology for PCS Global Marine and Energy could scale to accommodate other specialty line risk losses, subsequently leading to the development of PCS Global Cyber.

“When we worked on PCS Global Terror—using our specialty lines approach—we saw the methodology could support events with multiple insureds (so, specialty lines but more cat-like losses). That helped us expand the cyber loss index to include cyber catastrophe, with non-affirmative cyber rather than just affirmative cyber risk losses,” said Johansmeyer.

After successfully taking on specialty lines cat-type losses, Japan was next on the PCS radar, driven by client demand following the major losses of 2018, including Typhoons Jebi and Trami, and the extremely damaging floods.

“Specifically, they wanted a PCS industry loss index for catastrophes in Japan. In addition to the strong working relationship, they cited the fact that PCS is truly independent, that we have seven decades of institutional experience, and that we’ve demonstrated we can quickly adapt to catastrophe activity in new markets.

“For every product, we’ve had events at go-live that were still open for resurvey. For PCS Global Marine and Energy and PCS Global Cyber, we’ve had new losses arise as well. We’ve evaluated events for PCS Global Terror and have been able to show the market how they didn’t reach the US$25 million threshold, despite the rumours being peddled to the press on Lime Street. And finally, we routinely handle large and difficult losses.

“No other insurance industry loss reporting agency has handled anything as big or difficult as Harvey, Irma, or Maria, let alone the fires or Michael. We’ve been doing them all at once along with many others.

“It made sense for us to enter Japan, and the fact that our clients suggested that we ‘do what [you’re] doing for specialty’ speaks to the effectiveness of the approach. Specialty lines innovation opened property-catastrophe doors for us. And at this point, we’re preparing to scale this approach further in both specialty and catastrophe, with a few things planned for later this year. The early sign-up activity for Japan (some of it prelaunch) provided the necessary validation for the approach, along with the robust subscription activity we’ve seen for PCS Global Cyber and PCS Global Marine and Energy,” said Johansmeyer.

It’s not just new regions that PCS has added to its growing list of services, with the firm recently completing some work with the U.S. index, including both market share capture rates and county-level data for the U.S.

Discussing the development of its market share capture rates, Johansmeyer highlighted the great work undertaken by PCS’ operations team.

“During one of our strategy sessions, we just decided that it was time to include market share capture rates. There have been plenty of rumours in the market about low market share capture, and it’s been pretty annoying. Our ops folks have very deep relationships and do incredible work. They sometimes deliver two or even three times what the rumour mill gives them credit for. Some broker or underwriter tries to count up our market share based on what they catch through the grapevine on Front Street or through client interactions, without even knowing who our contacts are at different insurers. They get it wrong, and for decades, we’ve had to accept that,” he explained.

While other loss reporting agencies might provide a target capture rate, or allow the market to surmise capture rates, PCS is the only loss reporting agency that reports market share capture rates.

“Further, no other loss reporting agency even provides the depth of process overview that we do. PCS has decided to become a leader in industry loss reporting transparency, and we’re excited to take on this responsibility. Now, similar organisations worldwide can see what’s possible!

“It’s important to remember that we do this only in the United States and only for events of at least US$1 billion. For smaller events (which are the minority of our event set every year), we need to be careful to protect the anonymity of our collaboration partners. Our first event with this new level of disclosure was the February 2019 resurvey of Hurricane Michael, and open events (such as Hurricanes Harvey, Irma, and Maria) will be updated as their resurveys are published. New events will receive this level of disclosure as we publish preliminary estimates on them,” said Johansmeyer.

Currently, the firm’s new county-level data for the U.S. doesn’t include market share capture rates, but Johansmeyer said this could be added in the future.

He continued to explain exactly what county-level does include.

“For events expected to reach at least US$1 billion, we provide industry loss estimates and estimated claim counts by class of business for every county included in the event. For historical coverage, we began with Hurricanes Harvey, Irma, and Maria; and we’re following that up with past events that are still open for resurvey. All new events will be picked up as well—for all natural and man-made perils in all 50 states and U.S. territories and possessions,” said Johansmeyer.

For a group that covered only two risk areas until 2015, PCS has done a lot in a relatively short amount of time. Looking forward, Johansmeyer told Artemis that he would like to see PCS take a broader canvas.

“As far as traditional industry loss reporting is concerned, I’m starting to think about markets where we may not be needed for 15 or 20 years. I’d like to enter some as early as possible. But the challenge is that we would wind up requiring work of collaboration partners before they’d see any benefit, and that’s a difficult proposition in new and developing markets. There are several regions I like, and in general, I love the microinsurance space.

“Additionally, I can see PCS moving beyond traditional loss reporting into the collection of other types of industry data. For now, we’re exploring a few ideas on a limited basis as test cases; and if we can show the value we’d like to, then we may expand a bit more. Not much I can say beyond that right now, but in many ways, PCS feels to me more like one of my old start-ups than it does the 70-year-old division of a 40-year-old Fortune 500 company. If you have some ideas for us, just call me. Seriously,” he concluded.


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