PCS (Property Claim Services)
A service that designates US catastrophes and estimates their industry-wide insured cost, whose figures serve as the trigger for industry loss warranties and many catastrophe bonds.
Property Claim Services is a US information service that has for decades designated as catastrophes the events causing insured losses above a threshold, set at 25 million dollars, and published successive estimates of their total insured cost for the whole market, by state and line. Each event receives a number, which becomes the common reference for insurers, reinsurers and investors. The value of these figures goes beyond statistics: they serve as a contractual trigger. An industry loss warranty pays when the market loss estimated by the service exceeds a threshold; many index-triggered catastrophe bonds depend on it likewise. The index has the advantage of being independent of the cedent, which removes moral hazard and speeds settlement, at the price of basis risk: the buyer's loss may differ from the market's. A similar service, PERILS, established in Zurich in 2009, publishes comparable estimates for Europe and other regions. For the alternative risk transfer underwriter, knowing the revision schedule of these estimates is part of assessing the risk.
Textbook case: a Florida insurer buys an industry loss warranty paying 50 million dollars if a Florida hurricane's insured loss, as estimated by the service, exceeds 30 billion. A hurricane causes 35 billion of market losses: the warranty pays, even if the buyer's own loss is lower than the market figure would have suggested.
Property Claim Services, PCS, PCS index
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.