PERILS AG
A Zurich company set up in 2009 that publishes industry exposures and insured losses by event in Europe, used as the index trigger for cat bonds and industry loss warranties.
An index-triggered contract is only as good as the index it cites: it needs a measure of losses across the whole market, published by a third party that neither the cedent nor the investor controls. In the United States, PCS had long filled that role, but Europe had no equivalent, so winter windstorms were covered almost entirely on an indemnity basis. PERILS was founded in Zurich in 2009 by several insurers, reinsurers and a broker, in equal shares, to close that gap. It collects sums insured from insurers and, after a major event, reported losses, then publishes estimates by peril and by CRESTA zone on dates set in advance. That granularity lets a deal weight the index by the sponsor's portfolio distribution and so reduce basis risk, without eliminating it.
The first cat bond to use a PERILS index, Successor X (Series 2010-1), closed on March 26, 2010: 120 million dollars of three-year notes whose European windstorm component was triggered by PERILS industry loss estimates, weighted by country from Belgium to the United Kingdom.
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