CRESTA zones

The CRESTA system (Catastrophe Risk Evaluating and Standardizing Target Accumulations) is a standardized geographical zoning reference, administered by a professional organization grouping the main global reinsurers and insurers, that divides each country into zones that are homogeneous from the natural catastrophe exposure standpoint. The objective is to enable market participants to report and monitor their exposure accumulations in a uniform and comparable manner. The granularity of zoning varies with a country's importance for natural perils: Germany is divided into 130 zones, Japan into 68, France into 57. Each CRESTA zone is associated with aggregated exposure data (insured values in millions of local currency) that enable the reinsurer to calculate its maximum exposure to an event such as a tornado, flood, earthquake or windstorm. Cedants are required to report their accumulations by CRESTA zone during catastrophe treaty negotiations. Without this reference, each insurer would use its own geographic breakdown, making it impossible to aggregate exposures at market level and detect dangerous concentrations. CRESTA is also used as an input variable for catastrophe models from the major vendors (AIR, RMS) and facilitates data exchange in international reinsurance operations.

An international reinsurer finds during a quarterly review that it has accumulated 4.5 billion euros of gross exposure in CRESTA zones 31 to 38 covering the French Riviera and the Rhône delta, primarily exposed to flood risk. This concentration exceeds its internal zone limit. It decides to restrict its renewals in those zones and purchase an ILW on the ILS market to cap its exposure.

CRESTA, Catastrophe Risk Evaluating and Standardizing Target Accumulations, zones de cumul, CRESTA zones