New marine and energy loss index could spur ILS into new risks
PCS has claimed that its launch of a new loss index covering the global marine and energy markets could help bring new risks to the insurance-linked securities (ILS) markets, a necessity if that form of risk transfer is to continue to grow and develop.
The company has this week formally launched PCS Global Marine and Energy, its first entry into the non-elemental large risk loss space. It said this will be followed by several other specialty lines loss aggregation solutions.
“Ultimately, the future growth of the insurance-linked securities (ILS) space will depend on the ability for original risk to enter the market, providing for both a broadening of engagement and the ability to deliver depth within each line,” the company said it its latest PCS Q1 2017 Catastrophe Bond Report.
“The ILS market demand for new risk areas and types remains significant. Conversations throughout the January 1, 2017, renewal and after have emphasized the interest the ILS market has in lines such as global marine and energy, terror, and cyber, among others. The launch of PCS Global Marine and Energy should help satisfy this need by bringing more original risk to market, with subsequent loss aggregation solutions likely to help the market expand further.”
Currently, PCS Global Marine and Energy has losses for 11 events going back to 2009, with efforts in progress to complete the historical database for this period.
The PCS Global Marine and Energy loss estimate process begins with the designation of a marine and energy loss event. When PCS believes that an event is likely to cause more than $250 million in damage, it assigns a four-digit serial number, and the event becomes a “PCS Identified Marine and Energy Event.”
For each loss event, PCS issues an event designation bulletin, indicating that it believes the loss likely to exceed $250 million. The bulletin also includes information about the event, such as location, likely cause of loss, type of event, and other anecdotal information.
At the end of the second quarter following the loss event, it will issue a bulletin with its preliminary loss estimate (for example, the first estimate for a March 15 event would come out in July). It will then publish quarterly updates until it believes the loss estimate is stable, based on feedback from companies providing underlying loss data to PCS.
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