Willis Re has become the first reinsurance broker to structure and trade an industry loss warranty (ILW) using Property Claim Services’ (PCS) new Japan index as trigger.
PCS expanded its industry loss data aggregation and index reporting services to include non-marine catastrophe losses in Japan in January 2019, following the impacts of major catastrophes in Japan last year.
Previously, ILWs have been structured using triggers based on research teams’ estimates of market wide cat losses from the larger reinsurers, but these have never been official providers of industry loss data.
Tom Johansmeyer, Co-Head of PCS, spoke to our sister publication, Artemis, about the PCS Japan ILW.
“We’re proud that the market chose PCS to help improve the ILW market,” he explained. “As the only independent loss reporting agent, our mission is to help open up more regions for the global reinsurance community. There’s no substitute for PCS’s independence, client focus, work ethic, and commitment to the global reinsurance community.”
“With the addition of PCS Japan to our industry loss index portfolio, we’ve expanded not only our global coverage, but the scope of support we can provide to the market,” Johansmeyer continued.
“Following the evident shortcomings in Japan ILWs with other triggers, we hope to help more clients make the change to our independent and reliable alternative, which we believe could grow our share of industry loss index-exposed even further. In addition to supporting clients already in the Japan ILW space, we believe that our loss index could help bring more original risk to market, resulting in new growth opportunities for worldwide cedants and markets.”
“Willis Re’s efforts to be first in this space have resulted in a groundbreaking ILW transaction that we believe will pave the way for accelerated market expansion.”
The use of the PCS industry loss trigger for Japan is expected to help stimulate further ILW issuance in the region, and its possible that the trigger may be used in future as a cat bond trigger for other reinsurers with exposure in the Japanese property market.