CRESTA zones

CRESTA zones (Catastrophe Risk Evaluating and Standardizing Target Accumulations) are the common grid the market uses to report its natural catastrophe accumulations. The organization that maintains them brings together the main insurers and reinsurers; it divides each country into zones that are roughly uniform in their exposure to natural perils, so that everyone counts accumulations the same way. Resolution depends on how much a country matters for nat cat: in France, the low-resolution zones follow the départements and the high-resolution zones the postcodes. When placing its cat treaty, the cedant submits its insured values zone by zone, in millions of local currency, and the reinsurer works out its maximum exposure to a windstorm, flood or earthquake. A CRESTA zone gives no loss figure. It tells you where the values sit; the probable maximum loss (PML) comes later, from a cat model that takes those accumulations as input, as the major vendors' models (Verisk, Moody's RMS) do. A cat underwriter therefore looks at two numbers per zone, the reported sum insured and the modeled loss, and the gap between them is what gets argued at renewal. Without the grid, every insurer would have its own map, and no one could add up the market's exposures or see where they pile up.