Reinsurers Can Sharpen Their Pricing Accuracy with ISO's Property Size-of-Loss Database

NEW YORK, May 27, 1999 — Pricing commercial property reinsurance has always been a challenge for the $20-billion property/casualty reinsurance industry because of the absence of up-to-date, accurate, aggregate loss-history information. Now actuaries at Insurance Services Office, Inc. (ISO), with input from professionals in the reinsurance industry, have developed a system for commercial property excess-of-loss reinsurance pricing.

ISO's Property Size-of-Loss Database contains industrywide information – on more than 600,000 occurrences, in 50 states and 21 occupancy groups – culled from ISO's 5.5-billion-record database. ISO used its loss information to develop more than 770,000 severity curves, which show the size of the expected loss for various policy limits.

The new ISO system lets users define a range, then define a risk in that range — information that's vital for properly pricing treaties and evaluating risks. Users can customize their analyses by selecting:

  • subline - Fire/Basic Group I, Extended Coverage/Basic Group II, Special Causes of Loss, or All Perils
  • coverage - buildings, contents, buildings plus contents, or buildings plus contents plus time element
  • amount of insurance in ranges
  • occupancy group
  • deductible treatment - ground-up or net of deductible

With a few clicks of the mouse the system can also select the appropriate severity curve based on any combination of the above factors, and then calculate the average severity within a given layer.

"Market conditions demand more sophisticated pricing methods," says Nolan Asch, principal of ISO's Reinsurance Division. "Never before have reinsurers had access to so much current, detailed information."

Customers can perform multiple analyses simultaneously with the system's user-friendly Microsoft® Windows 95 interface that's compatible with all major spreadsheet applications.

ISO provides information about property and liability risk, including statistical, actuarial, underwriting and claims information and analyses; consulting and technical services; policy language; and information about specific locations. ISO offers services for 18 lines of property/casualty insurance. In the United States and around the world, ISO serves more than 2,900 insurers and reinsurers, as well as agents, brokers, self-insureds, regulators, risk managers and government agencies.

Release: Immediate

Contacts:
Giuseppe Barone / Erica Helton
MWW Group (for ISO)
201-507-9500
gbarone@mww.com / ehelton@mww.com