Verisk Analytics announces new high resolution catastrophe index

Verisk Analytics is the parent company of AIR Worldwide and the Property Claims Services (PCS) brands and as such is well known in risk management and risk transfer markets. Today they’ve announced the launch of a new, high resolution catastrophe loss index which will be known as the Verisk Catastrophe Index.

The index builds on PCS’s 60 years of experience providing property loss estimation and AIR’s more than 20 years experience in risk modelling and analytics. The index will generate estimates of insured property losses on a county by county and line of business basis following PCS designated catastrophes.

Verisk say that the new index will allow for improved tailoring of catastrophe risk transfer instruments and enhanced transparency from its familiar loss-based trigger. “The high resolution of the Index is particularly beneficial to regional and specialty insurers and reinsurers and for shedding peak risks from nationwide books of business,” said David Lalonde, SVP at AIR Worldwide. “The Index also allows many new players to use industry loss-based insurance-linked securities to optimize their risk management strategy by tailoring protection to the precise counties and lines of business in which they are exposed.”

“We’ve provided industry estimates of insured losses following catastrophic events since 1949,” said Gary Kerney, AVP at PCS. “Increasing the resolution of those estimates to individual counties will allow companies to estimate reserves more accurately, assign finite claims management resources where they are most needed, and increase the precision of their benchmarking by an order of magnitude.”

Using the physical parameters of the catastrophic events as reported by organizations such as the United States Geological Survey (USGS) and the National Hurricane Center (NHC), AIR leverages its state-of-the-art catastrophe models and detailed database of insured industry exposure to distribute PCS state-level loss estimates by county. The Index estimates are then refined over time as updated PCS estimates and physical event parameters become available.

Vince McCarthy, SVP at Verisk Analytics, said “The Index is currently available for U.S. hurricanes, and Verisk plans to expand it to additional perils in the future. The Index is designed for use by actuaries, underwriters, and claim professionals, in addition to participants in the insurance-linked securities markets.”

This is another step forwards in risk modelling and reporting which should benefit the catastrophe bond marketplace. The enhanced transparency and predictability through the use of county level loss calculations should assist catastrophe bond issuers greatly. We’ll bring you further information on the new index when we have them.