The Index builds upon PCS's 60 years of insured property loss estimation experience and AIR's more than 20 years of catastrophe modeling expertise to generate estimates of insured property losses by county and by line of business following PCS-designated catastrophes.
The index allows for better tailoring of catastrophe risk transfer instruments while enhancing transparency thanks to its loss-based trigger mechanism. By focusing coverage only on those counties and lines of business where they have exposure, cedents can reduce their basis risk and ensure that they pay only for the protection they need.
"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," says David Lalonde, senior vice president 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."
The Verisk Catastrophe Index relies on PCS's network of insurer claim departments, insurance adjusters, emergency managers, insurance agents, meteorologists, and fire and police officials to estimate industrywide insurance payments for property lines of insurance in each state affected by a catastrophic event.
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