PERILS experience in Australia Prepared for Prepared by Darryl Pidcock - PERILS ICRM Conference, 4 July 2017
Reliable Market Data: A Prerequisite for Risk Quantification and risk transfer in Australasia 1. Introduction of PERILS 2. The Australian experience Market Data for Risk Quantification Market Data for Risk Tradability 3. Benefits for Asia Slide 2
PERILS - Data Aggregator & Reporting Agency PERILS is an independent data collector providing industry-wide catastrophe insurance data PERILS was incorporated in January 2009 in Zurich, Switzerland, on the initiative of the CRO Forum +, Marktgasse 3, 8001 Zurich, Switzerland WWW.PERILS.ORG contact@perils.org, +41 44 256 8100 Sydney Office soon to be established. Slide 3
PERILS - Motivation Improve Cat risk assessment Requires transparent and consistent insurance data Industry Loss Warranty Re/Insurance Collateralized Re/Insurance Facilitate industry-loss-based risk transfer Requires independent and specialized reporting agency Insurance-Linked Securities Slide 4
Independent Data Aggregator & Reporting Agency Data is made anonymous, validated, aggregated and extrapolated to market level. data TSI & Claims Insurance Insurance Companies Insurance Companies Insurance Companies Insurance Companies Companies PERILS Industry Exposure & Loss Database PERILS Industry Loss Index Service Slide 5 PERILS is an independent reporting agency providing industry-wide catastrophe insurance data. PERILS was incorporated in January 2009 in Zurich, Switzerland, on the initiative of the CRO Forum. Shareholders, each with equal share, include Allianz SE, AXA, Assicurazioni Generali, Groupama, Guy Carpenter, Insurance Australia Group, Munich Re, Partner Re, Swiss Re, and Zurich Insurance Group. PERILS purpose is to add transparency to the natural catastrophe risk landscape thereby increasing the liquidity and stability of the Nat Cat insurance market. For more info, please visit WWW.PERILS.ORG.
PERILS Australian experience Australia has them all! Slide 6
8 Years of PERILS 8 Years of Increasing Industry Support 70% 60% 50% 40% Market Coverage (all covered territories, % market property premium) 2009 2017 Since 8 years Market support grew significantly By the Industry, for the Industry AUS: >70% market coverage Europe: >65% market coverage Slide 7
PERILS Industry Exposure & Loss DB: 16 Countries Slide 8 Latest Additions: Australia - since Sep 2016 Canada - since Jan 2017, in cooperation with CatIQ Australia Austria Belgium Canada Denmark France Germany Ireland Italy Luxembourg Netherlands Norway Sweden Switzerland Turkey United Kingdom
PERILS Market Loss and Exposure Data Industry Loss & Exposure (Sums Insured) Database Aggregate Exposure Data - Earthquake Australia - in AUD - High-Resolution CRESTA Format Total Sum Insured per Coverage CRESTA ID CRESTA Description Occupancy Type Currency Number of Risks Buildings Value Contents Value BI Value AUS_2306 Gateshead COMMERCIAL AUD 129 69,398,842 20,504,413 12,707,770 AUS_2306 Gateshead RESIDENTIAL AUD 800 131,072,568 36,933,600 2,914,373 AUS_2307 Hamilton COMMERCIAL AUD 209 94,021,751 28,949,613 20,505,242 AUS_2307 Hamilton RESIDENTIAL AUD 1,939 492,482,602 108,111,813 9,751,511 AUS_2308 Hunter Region COMMERCIAL AUD 56 344,121,878 161,232,175 15,534,336 AUS_2308 Hunter Region RESIDENTIAL AUD 9 66,949 249,896 2,958 AUS_2311 Gresford East COMMERCIAL AUD 631 86,815,774 26,941,400 17,599,766 AUS_2311 Gresford East RESIDENTIAL AUD 945 201,338,916 43,500,687 4,847,946 AUS_2312 Nabiac COMMERCIAL AUD 329 36,694,217 13,037,625 8,330,866 AUS_2312 Nabiac RESIDENTIAL AUD 803 228,454,425 48,302,902 4,934,249 AUS_2315 Nelson Bay COMMERCIAL AUD 1,437 1,242,220,966 550,919,020 371,276,698 - Australia, Canada*: Bushfire, Earthquake, Extratropical Cyclone, Flood, Hailstorm, Tropical Cyclone - Europe (A, B, DK, F, D, IRL, LUX, NL, N, S, CH): Extratropical Cyclone - Italy, Turkey: Earthquake, Flood - UK: Extratropical Cyclone, Flood *: for Canada currently only loss data Slide 9
Tropical Cyclone Debbie (28 Mar 2017) AUD 1411m industry loss to date First PERILS Loss Report released on 9 May 2017 (6 weeks after event start date) with loss of AUD1.116m Courtesy:https://www.nasa.gov/sites/default/files/thumbnails/image/ debbie.a2017087.0342.1500m.jpg 2 nd loss report released on 28 June 2017 with loss of AUD 1.411m 1,500 750 0 TC Debbie (28 Mar 2017) AUD m 1,116 1,411 I II III IV Following loss reports in full resolution: 4 digit postcode, commercial/private lines Slide 10
PERILS Use Case 1 - Model Validation and Callibration vs. Improve reliability of Cat models by testing modelled data with real data -> validation, calibration TC Debbie Model TC Debbie Reality Adjust models according to real experience More realistic and robust risk assessment over time 1,500 1,350 1,000 vs. 1,411 Model A Model B Model C Modelled Loss PERILS PERILS Loss Slide 11
Damage Degree, % TSI Market Data for Risk Quantification 2 - Vulnerability Loss TSI Damage Degree Physical Intensity 70 / 1 000 000 = 0.007% of TSI 28 m/s Vulnerability of insured values Highly crucial component in any Cat model Over time risk modelling will benefit and will make risk assessment more robust and realistic Shows the value of combining loss with exposure data Slide 12 Physical Intensity, m/s
PERILS Use Case 3 Australia Model Comparison Market Losses for earthquake and tropical cyclone Australia based on different vendor models. The PERILS IED enables the computation of market losses and the direct comparison of the outputs of three different vendor models for Australian earthquake and tropical cyclone risk. Slide 13
PERILS Use Case 4 - Market Benchmarking TSI Market Shares Loss Market Shares TSI and Loss market shares in both maps are with identical colour coding Some zones have clearly lower / higher loss market shares than TSI market shares Assurances Hypothétiques SA Market Shares Commercial Property Sums Insured Loss Event A Loss Event B Loss Event C FRA.31 4.5% 6.0% 7.2% 5.9% FRA.32 2.9% 2.9% 3.0% 2.2% FRA.33 6.0% 5.5% 6.1% 6.1% FRA.64 14.0% 22.5% 24.0% 18.8% FRA.65 5.4% 5.2% 5.3% 5.4% FRA.66 3.0% 3.0% 2.5% 3.5% Why? Superior or inferior risks than market average? Claims adjustment? Claims fraud? PERILS Market Data are being used to identify weak and strong spots of a portfolio Slide 14
Motivation 1 - Facilitate Industry Loss Based Risk Transfer USD 3.2 bn PERILS-based limits at risk as at 30 Jun 2017 Private: 690 ILS: 2 488 PERILS industry loss data are used as triggers and for the risk assessment of industry-loss-based risk transfer products Used in industry-loss-based Cat Bonds (144A ILS) Industry Loss Warranty (ILW) Collateralized R/I Risk Swaps USD 3.2 bn of PERILS-based limits at risk as at 30 June 2017 More than 200 PERILS-based transactions placed since 1 Jan 2010, cumulative limits of more than USD 14 bn Slide 15
PERILS-based limits at risk as at 30 Jun 2017 Windstorm Europe ANP Australia EQ Turkey Private 785 ILS 2 488 Private 79 ILS 1 275 Private 257 PERILS Data enable additional capacity / higher tradability of Australian Cat risk Slide 16
Market Data for Risk Tradability 2 - More Risk Capacity USD 3.2bn Per 30 Jun 2017: Australia: USD 1 353m Turkey: USD 272m PERILS data facilitates the tradability of Cat risk! Slide 17
Actual Loss Market Data for Risk Tradability 3 - Better Protections Industry Loss weighted by country, state / province or CRESTA Simple and straightforward protection Easy modelling No disclosure of proprietary data Structured Industry Loss Industry Loss Parametric / Modelled Loss Increases matching, reduces basis risk 85% Per 31 Mar 2017 Trigger Value Structured Non-Structured Ideal retro product Slide 18
Slide 19 Outlook
Outlook 1 -Natural Catastrophe Data & Analytics Exchange NatCatDAX stands for Natural Catastrophe Data & Analytics Exchange and was launched in April 2017 as an insurance industry initiative Slide 20 Institute of Catastrophe Risk Management 50 Nanyang Avenue, N1-B1b-07 Singapore 639798 ICRM.NTU.EDU.SG ExecDir-ICRM@ntu.edu.sg, +65 6592 1866, Marktgasse 3, 8001 Zurich, Switzerland WWW.PERILS.ORG contact@perils.org, +41 44 256 8100 SINOTECH ENGINEERING CONSULTANTS, INC., No 280, Xinhu 2 nd Road, Neihu Dist., Taipei City 11494, Taiwan www.sinotech.org.tw/en sinotech@sinotech.org.tw, +886-2-87919198 NatCatDAX aims to increase data availability for the natural catastrophe insurance market in Asia and support new risk transfer solutions The NatCatDAX mission is executed by a consortium consisting of Institute of Catastrophe Risk Management (ICRM) at NTU PERILS SINOTECH
Outlook 2 - New Zealand Strong demand by PERILS user community to include NZL Reinsurers, ILS Funds, Intermediaries, Modellers Same data collection procedure as for Australia Value Proposition Additional Cat capacity for NZL over time Better risk assessment of NZL Cat over time Slide 21 Timing of release will depend on sufficient market support to provide data
What is the value to the markets in Asia? Benefit Increased Transparency in Cat Risk Improved and more stable Cat Risk Modelling Cost Minimal effort for exposure and event loss data provision Slide 22 New risk transfer products, increased Cat risk liquidity Globally accepted and trusted Reporting Agency Used in more than 200 insurance risk transactions Best-practice legal framework and IT security standards Independent and Objective Cat Market Data Exposure and Claims Benchmarking Free Access for Data Providers Can authorize Reinsurance broker to provide data to PERILS
Conclusions PERILS Data enable additional capacity / higher tradability of Australian Cat risk PERILS Data enable a more accurate assessment of Australian Cat risk Slide 23 It is astonishing how much a increased data availability can achieve!
Slide 24 Appendix
Live Loss Forecasts Website - Wind-Jeannie Wind-Jeannie is a website providing real-time industry loss forecasts for European Windstorms Updates every 12 hours Functionality similar to weather forecast websites Runs on PC, laptops, tablets, smart phones WJ can assist insurance companies to prepare for large windstorm events loss adjuster and call centers internal communication short-term protection Wind and loss footprints can be downloaded Exclusive on-line service for PERILS data providers and clients www.wind-jeannie.org Slide 25
Contact Details Marktgasse 3 8001 Zurich Switzerland contact@perils.org PERILS.ORG T: +41 44 256 8100 Slide 26