PCS, a business unit of Verisk, has announced the expansion of its Global Terror Index to include SRCC (Strikes, Riots, Civil Commotions, and Civil Unrest) to help enhance the understanding and management of political violence risks in the re/insurance market.
The SRCC enhancement will also provide robust data to assess and quantify the risks associated with civil unrest, the global data analytics and technology provider explained.
Insured losses linked to major bouts of unrest have reached new highs in recent years, with SRCC risks rising in more than 50% of countries over the last 12 months, according to Verisk Maplecroft.
With the rise of these events, re/insurers must ensure they accurately assess historical and current loss data for these types of perils. This enhancement, Verisk noted, can provide a systematic way to measure the frequency and severity of these events.
Additional uses of the product include reinsurance and alternative risk-transfer transactions, like industry loss warranties (ILWs), an area where the need for a loss aggregation service has been evident, according to experts.
Ted Gregory, head of global PCS operations at Verisk, said: “PCS has identified over $10 billion in industry wide SRCC losses across 20 events dating back to 2010, compared to less than a billion on the terror side.
“This significant disparity highlights the need for a robust index that reflects the growing severity and frequency of SRCC events. By expanding the view of global political violence, PCS has developed an index that will help enable the market to trade SRCC on a standardised platform with an established methodology.”
The enhancement looks to benefit re/insurers in gaining additional capacity from capital sources. By highlighting regions where the demand for their products is increasing, stakeholders can tailor offerings more effectively.
Moreover, tracking changes in the index over time can enable various markets to identify trends in civil unrest events.
Alex Mican, head of PCS global strategy and growth at Verisk, stated: “The existing global terror re/insurance market is small, but there’s a widespread view that it will grow significantly over the next decade.
“However, some structural changes are needed to facilitate its development. One important development will be the further entry of capital markets capacity to provide both reinsurance and retrocessional protection for companies assuming SRCC risk.”
