Presentation on theme: "5/13/2015 Property Claim Services The PCS Process for Identifying Catastrophes and Estimating the Related Losses By Gary Kerney, AIC, RPA Assistant Vice."— Presentation transcript:
5/13/2015 Property Claim Services The PCS Process for Identifying Catastrophes and Estimating the Related Losses By Gary Kerney, AIC, RPA Assistant Vice President PCS
5/13/2015 Introduction What is a Catastrophe? The PCS process for estimating cat losses What’s ahead? Where and What are the challenges?
5/13/2015 What Is a Catastrophe? Catastrophe Definition An event causing $25 million or more of insured property damage AND affecting a significant number of policyholders and insurers
5/13/2015 What Is a Catastrophe? Catastrophe Definition Changes Over Time 1949 to December 1982 - $1 million 1983 to December 1996 - $5 million Since January 1, 1997 - $25 million
5/13/2015 PCS Catastrophe Identification Definition Analysis –Separation of Events Earthquakes California Fires –Significant Number of Claims California Fires New York City Steam Pipe Explosion
5/13/2015 PCS Catastrophe Estimating 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”
5/13/2015 PCS Sources for Loss Information Insurer Loss Reports Market Share Analysis On-Site Surveys or Flyovers National Insurance Risk Profile Data Confidentiality Estimate Compilations
5/13/2015 Insured Property Damage by PCS Storm Family 1950 to 2008 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
5/13/2015 The PCS Top 10 All Hurricanes except WTC and Northridge YEAR CAT # STORM FAMILY ESTIMATED LOSS 200549 Hurricane Katrina $41,100,000,000 200148 Fire - Other $18,778,500,000 199227 Hurricane Andrew $15,500,000,000 199478Earthquake$12,500,000,000 200860 Hurricane Ike $11,500,000,000 200554 Hurricane Wilma $10,300,000,000 200426 Hurricane Charley $7,475,000,000 200430 Hurricane Ivan $7,110,000,000 200551 Hurricane Rita $5,627,200,000 200428 Hurricane Frances $4,595,000,000
Catastrophe Loss Estimating PCS figures are not adjusted for inflation – –Stated in the dollar value of the year of occurrence, or in “nominal” dollars Also not adjusted for demographic or other changes over time –Value of comparing Elena (1985) to Katrina (2005)?
5/13/2015 Estimate Distinctions in Measuring Insured Loss Catastrophe Year 2004 Estimate Distinctions in Measuring Insured Loss Catastrophe Year 2004 PCS –$19.0 billion –1.645 claims Swiss Re Outlook More Global Caribbean More Loss Categories Oil Drilling Platforms PCS –$19.0 billion –1.645 claims Swiss Re Outlook More Global Caribbean More Loss Categories Oil Drilling Platforms Florida OIR –$21.2 billion –1.65 million claims $21.2 B - $1.7 for deductibles - $1.0 for LAE $18.5 billion total
5/13/2015 Property Claim Services Estimate Confirmation 1989 - Hurricane Hugo –SC = $2.66 Billion (4/90) vs. PCS = $2.55 Billion (2/90) –Difference of 4.3% 1991 - Loma Prieta Earthquake –CA = $902 Million (7/91) vs. PCS = $960 Million (10/89) –Difference of 6.5% 1992 - Hurricane Andrew –FL = $15.018 Billion (1/93) vs. PCS = $15 Billion (2/93) –Difference of.1% 1994 - Northridge Earthquake –CA = $12.3 Billion (5/96) vs. PCS = $12.5 Billion (9/95) –Difference of 1.6% 2004 Florida Hurricanes –FL = $18.5 Billion (8/05) vs. PCS = $19.0 Billion (10/05-1/06) –Difference of 2.7 % 2005 Hurricane Rita Texas and Louisiana –TX DOI for both states = $5.4 Billion (3/07) vs. PCS = $5.5 Billion (1/07) –Difference of 1.8%
5/13/2015 Catastrophe Loss and Claims All Catastrophes 2004$27.5 B3.4 million Hurricane Claims 2004$22.9 B2.3 million All Catastrophes 2005$61.5 B4.4 million Hurricane Claims 2005$57.5 B3.4 million All Catastrophes 2006$ 9.0 B2.3 million Hurricane Claims 2006 0 0 All Catastrophes 2007$ 6.7 B 1.2 million Hurricane Claims 0 0 All Catastrophes 2008$26.0 B4.0 million Hurricane Claims 2008$14.1 B1.7 million
5/13/2015 What’s Ahead 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-KobeTokyoAmsterdamRotterdamNagoya Tampa-St. Pete Virginia Beach
5/13/2015 What’s Ahead How bad might it become? –Remodel the 1938 hurricane –Infrastructure damage –Weather concerns –Time to repair –Demand from other catastrophes
Expanded Catastrophe Information Loss Type –Workers Comp –Offshore and Related Property –Madoff – D&O, E&O, Upscale HO Theft Loss Territory –Europe (PERILS) –Japan –Caribbean –Canada –Australia 5/13/2015
The Expanding Impact of Catastrophes Demand Surge – –Basic Principle, Florida Contractors, LA & MS contractors, Wilma Adjuster “Burnout” –Fight the Neighbor –Talking to the Wall Rebuilding Process –Land use –Building codes –Employee Needs –Availability of insurance
5/13/2015 The Expanding Impact of Catastrophes 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
5/13/2015 Other Repercussions and Issues There are other, major consequences that follow from mega-catastrophes: Class action lawsuits spurred in part by a lack of appropriate coverage for perils that end up being uninsured. Finding sympathetic juries for trials of those accused of perpetrating insurance fraud. The debt incurred by the National Flood Insurance Program and other public entities, such as wind pools, requires taxpayers to assume a long term debt to support recovery efforts. The political furor that results from either personal loss experience or from the perception of utter breakdown in response and recovery efforts. A change in the way insurers manage risk and exposure that often includes increased premiums or higher deductibles or non-renewed policies.