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11-Sep-2009
The PCS Process for Identifying Catastrophes and Estimating the
Related Losses
ByGary Kerney, AIC, RPAAssistant Vice President
PCS
What is a Catastrophe?
The PCS process for estimating cat losses
What’s ahead?
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Catastrophe Definition
An event causing $25 million or more of insured property damage AND
affecting a significant number of policyholders and insurers
Reported via ISOnet PCS to:
Over 600 re/insurers and others
Over 3,350 individual users
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Catastrophe Definition Changes Over Time
1949 to December 1982 - $1 million
1983 to December 1996 - $5 million
Since January 1, 1997 - $25 million
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Definition Analysis
Separation of Events
Earthquakes
California Fires
Significant Number of Claims
California Fires
New York City Steam Pipe Explosion
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Preliminary Estimate – 10 to 14 Days
Resurvey Estimate
If preliminary estimate is over $250 Million
Or, unusual circumstances warrant close monitoring
PCS resurveys and reports every 60 days
Final Estimate
No new claims, most closed, confidence in reserves
PCS always uses the term “Estimate”
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Insurer Loss Reports
Actual and Projected
Market Share Analysis
State by State Variation
On-Site Surveys or Flyovers
Estimated Rate of Damage and Size of Loss
National Insurance Risk Profile Data
Compare and Evaluate Data
Confidentiality
Estimate Compilations
Judgment and Experience
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Storm Family Estimated Insured Loss
Hurricane (88) $135,556,445,790
Wind and Thunderstorm Event (1198) $96,725,197,458
Winter Storm $23,678,656,159
Fire - Other $20,050,753,604
Earthquake $13,964,150,000
Wildland Fire $6,467,348,000
Tropical Storm $3,974,320,000
Riot $970,250,000
Water Damage $300,000,000
Utility Service Disruption $180,000,000
Volcanic Eruption $27,000,000
Total Insured Loss (1536) $301,104,121,011
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YEAR CAT # STORM FAMILY ESTIMATED
LOSS
2005 49 Hurricane Katrina $41,100,000,000
2001 48 Fire - Other $18,778,500,000
1992 27 Hurricane Andrew $15,500,000,000
1994 78 Earthquake $12,500,000,000
2008 60 Hurricane Ike $11,500,000,000
2005 54 Hurricane Wilma $10,300,000,000
2004 26 Hurricane Charley $7,475,000,000
2004 30 Hurricane Ivan $7,110,000,000
2005 51 Hurricane Rita $5,627,200,000
2004 28 Hurricane Frances $4,595,000,000
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STATES:Estimated
Insurance Payment
Kentucky $300,000,000
Maryland $10,000,000
Ohio $385,000,000
Oklahoma $320,000,000
Pennsylvania $90,000,000
Tennessee $100,000,000
Texas $106,000,000
Virginia $9,000,000
West Virginia $30,000,000
Total All States: $1,350,000,000
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Ohio
Personal 70,000 $ 4,328 $ 303,000,000
Commercial 5,600 $ 13,392 $ 75,000,000
Auto 2,400 $ 2,916 $ 7,000,000
Total 78,000 $ 4,935 $ 385,000,000
Catastrophe Serial Number 63
DATES:February 10, 2009 To February 13, 2009
STATES:Kentucky, Maryland, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia
PERILS:Flooding, Hail, Tornadoes, Wind
STORM FAMILY:Wind and Thunderstorm Event
In a recent report for the Organisation for Economic Co-operation and Development, researchers noted: The first estimate of exposure to coastal flooding and high
winds finds 60% of worldwide exposure in 10 cities (ranked in order):
Miami
Greater New York
New Orleans
Osaka-Kobe
Tokyo
Amsterdam
Rotterdam
Nagoya
Tampa-St. Pete
Virginia Beach
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Loss Type
Workers Comp
Offshore and Related Property
Madoff – D&O, E&O, Upscale HO Theft
Loss Territory
Europe (PERILS)
Japan
Caribbean
Canada
Australia
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New Lines of Insurance Affected
World Trade Center Attack
Life, Health, Workers Comp
Use of PCS catastrophe serial number
Hurricane Katrina
Life and Health Benefits Insurance
Mortgage Insurance
Pandemic
TXDOI Survey for Business Continuity
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Issues
Growth of the ILS Market
Growth geographically
Competition
Other Triggers
Parametric (Paradex)
Indemnity
Modeled
Index
Challenges
Expand Territory
PERILS in Europe
Caribbean
Canada
Other
Expand Estimates to include other lines
Offshore
Workers Comp
