NEW YORK July 25, 1997 — Under an agreement announced today, IndexCo, LLC, an affiliate of Guy Carpenter & Company, Inc., will receive data and data processing services from Insurance Services Office, Inc. (ISO), for the production of the Guy Carpenter Catastrophe Index (GCCI).
The GCCI measures the amount of insured damage to homes in the United States from atmospheric disasters such as hurricanes, tornadoes, and winter storms and can be used as a standardized basis for financial contracts that transfer catastrophic risk. "Most financial and insurance experts agree that greater diversification of risk and additional sources of capital are needed to help the property/casualty industry withstand the impact of future catastrophes that may generate claims of $50 to $100 billion," said Bruce Thomas, IndexCo's chief executive officer.
The GCCI is based on insurance and paid-claim information drawn from a sample of large homeowners insurance companies and will provide information on geographic units as small as a single ZIP code. To assist users, IndexCo is publishing detailed information on the exposures and losses underlying the GCCI. For each geographic unit covered by the index, information will be available on the number of homes in the sample, the average deductible, type of construction and building age.
"The GCCI is a significant advance in providing information for securitizing catastrophe risk," said John J. Kollar, ISO's vice president, actuarial services and research. "We will be processing over 40 million insurance and loss records annually for this effort and are confident that the GCCI provides the informational detail and objectivity that are necessary to satisfy both insurers and investors. This information will be of particular interest to investors, insurers, reinsurers, reinsurance brokers, catastrophe modeling companies, and rating and regulatory organizations."
"This agreement allows IndexCo to make use of ISO's unparalleled expertise and knowledge in working with transaction-level insurance and loss data," said Mr. Thomas. "It will also give users a very high degree of statistical confidence in the index, since the insurance companies that are presently included in the index make up nearly 25% of the market for U.S. homeowners insurance."
The GCCI will be the basis for catastrophe futures that will trade on the Bermuda Commodities Exchange (BCOE). Additionally, the index will serve as a standardized basis for insurers who desire to diversify their exposure by buying, selling and swapping catastrophe risk.
Additional information on the GCCI and a copy of the Index Manual can be found on IndexCo's web site at www.indexco.com. More information about ISO can be found at www.verisk.com/iso and www.verisk.com.