PERILS Places First Two European Risk Transactions

NU Online News Service, Dec.17, 11:32 a.m. EST

Zurich-based PERILS AG, the European catastrophe insurance data aggregator announced placement of two insurance risk transactions, one with Credit Suisse and another with unnamed parties.

The transactions, the first of their kind, are based on a PERILS industry loss index and relate to Industry Loss Warranty (ILW) reinsurance contracts which will provide protection against a major European windstorm event.

Credit Suisse Asset Management is involved with one transaction as the protection provider and Munich Re as the counterparty. The other was arranged by Willis Re with the counter-parties remaining unnamed.

PERILS said its part of the deals involves providing an independent authoritative source of data to determine the property market loss arising from a large windstorm event affecting Europe. This information will be used to produce an index value to determine the payout of the protection under the ILW contracts.

Luzi Hitz, PERILS chief executive officer, said, "These two transactions are the first ILWs to use a PERILS index. This is an important development, as it illustrates the key role which PERILS plays as an independent loss aggregator, in enabling the use of industry loss triggers for European windstorm events."

Niklaus Hilti, Credit Suisse head of insurance linked strategies, added, "The use of a PERILS industry loss index in this ILW reinsurance contract is a key milestone in the development of a more mature and liquid market which is in the best interest of both reinsurers and investors. We are happy to support PERILS together with Munich Re."

"Munich Re fully supports the PERILS initiative," said Hans Joachim Thoenes, Munich Re head of retrocession, "Our main objective is to contribute to the creation of a more liquid and standardized ILS and derivatives market for European windstorm risk which is to our own benefit, that of our clients in the insurance industry and potential investors."

Mr. Thoenes commented that, in the opinion of his firm, the launch of PERILS is an important step in the direction of standardization.

"We are proud to have been able to set up with Credit Suisse Asset Management the first transaction in the market based on a PERILS industry loss index," he added.

Henry Kingham, Willis Re executive director, commented, "We are delighted to have worked closely with Luzi and the team on the first brokered PERILS transaction. As we have commented before, PERILS helps deal with the long standing issue of an independent European wind loss index and will hopefully mean the expansion of indexed trades triggering off European windstorm events."

PERILS is a European insurance industry initiative established in April that receives its data directly from insurance companies underwriting property business in the affected areas and applies a standardized procedure to estimate industry-wide insured losses, which then form the basis of the PERILS index service.

PERILS also makes available aggregated exposure data (sums insured) which can be used to model probabilities of triggering specified index values through probabilistic catastrophe modeling techniques.