Verisk Catastrophe Index Now Covers U.S. Earthquake Risk

The Verisk Catastrophe Index has been expanded beyond the hurricane peril to also cover U.S. earthquake risk, including fire following earthquake.

The index provides industry-wide insured property loss estimates by county and line of business based on data from ISO’s Property Claim Services unit and AIR Worldwide, two other subsidiaries of Verisk Analytics.

The Index leverages PCS insured industry property damage estimates by state and line of business. AIR uses information about the location and characteristics of the catastrophic event — as well as the distribution, value, and vulnerability of insured industry property exposure affected by that event in each state — to estimate each county’s contribution to the overall statewide loss by line of business. Verisk said this allows its catastrophe index to account for an event’s location and intensity and the geographic distribution of buildings and assets affected by that event to determine where losses occurred within each affected state. Each county’s estimated share of losses is then used to disaggregate the PCS state and line-of-business insured property loss estimates to the county level.

David Lalonde, senior vice president at AIR Worldwide, said that expanding the scope of the index beyond the U.S. hurricane peril to include U.S. earthquake risk “provides a way for issuers to adopt a common established framework for multiperil risk-transfer transactions.”

The index also allows companies to estimate reserves more accurately, assign finite claims management resources where they are most needed, and increase the precision of their risk-transfer benchmarking by an order of magnitude, Verisk said.