Database Visualization: The PCS Catastrophe Map

By Gary Kerney

If a picture is worth a thousand words, a map is worth a thousand pictures.

ISO recently created a map that displays the catastrophe-history database from Property Claim Services (PCS) in an interactive form, providing a unique perspective on the effects of catastrophes.

The PCS Catastrophe Map is a data-visualization tool that allows insurers to compare states — and perils — across the country during a given period of time. Claims departments can use the tool as part of a training program for new employees, to make presentations to management and board members, and to educate customers about catastrophe risk.

The breadth and depth of the data in the PCS database is instructive. PCS has compiled and reported estimates of insured property losses resulting from catastrophes since 1949. For each ­catas­trophe, PCS estimates measure losses from an array of events, including hurricane, earthquake, winter storm, and wildland fire. The PCS catastrophe-history database contains information about perils and catastrophes in all 50 states. It is one of the most comprehensive property loss databases in the industry.

From every bulletin that PCS publishes for each catastrophe, the information about dates, states, storm family, and the loss or loss development is captured in the PCS database. The interactive map was designed to aggregate the losses from storm families and the catastrophes included in each family separated by decade since 1950. The map provides a graphic representation of the reach, or limits, of different types of catastrophes. For example, all states have been affected by severe weather; however, only three western states have experienced earthquake catastrophes, and most of these have occurred in California.

Insurers and risk managers can gain knowledge and benefit from the map's deep visual data about catastrophe losses. It will help them identify the physical risks faced by the properties they manage around the country. Many regions are susceptible to their own types of catastrophes, and the PCS Catastrophe Map presents an overview of risk that is easy to view and interpret.

But there is really no way to tell what catastrophes the future will bring. Some current scenarios identify catastrophes costing in excess of $100 billion. Those potential losses are generally related to major hurricanes striking New York, Miami, or New Orleans or a major earthquake affecting Los Angeles. There is also the threat of concurrent events causing similar size losses but occurring in different geographic areas. For example, the Loma Prieta earthquake in 1989 followed only a few weeks after Hurricane Hugo. In 2005, the country and the insurance industry faced losses occurring within weeks from Katrina, Rita, and Wilma.

Hurricanes Elena and Katrina exemplify why it is difficult to assess the impact of future events based on the impact of earlier catastrophes. Elena occurred in 1985. It was a Category 3 hurricane and made landfall in coastal Mississippi. The cities and towns in that region were small and economically depressed. When Katrina made landfall in coastal Mississippi 20 years later, the region had been transformed with the advent of gambling and the economic upsurge that accompanied this development. The loss from Elena in 1985 was less than $600 million. The loss from Katrina was more than $40 billion.

The PCS Process
The process employed by PCS to estimate insured property damage resulting from catastrophes has not changed over the years. PCS relies on reports from insurers regarding claims and loss payments and reserves to estimate ultimate insured property damage payment for each catastrophe event. However, over the years, there have been several changes to the overall catastrophe identification system. The threshold for a catastrophe designation has changed three times. In 1949, when the system began, the threshold was $1 million. The threshold increased to $5 million in January 1982, and the last increase to $25 million took place in January 1997. Since 1998, PCS has reported the number of claims for personal, commercial, and auto losses by state for each catastrophe.

All PCS catastrophe information is issued via ISOnetSM, a password-protected website. The information is available only to subscribers to PCS catastrophe services. PCS estimates are updated if the preliminary estimate (the first PCS estimate) is $250 million or more. If so, PCS initiates a resurvey process through which insurers are continually surveyed for updated claims and payment information for individual catastrophes. The updated information is published every 60 days. When insurers report there are no new claims, that most of the reported claims are closed, and that they are confident in the reserves for those that remain open, PCS concludes the resurvey process and publishes a final estimate.

Providing information not available from any other source, PCS enables insurers to plan for the future and better measure and analyze losses from catastrophe exposures. It delivers dependable figures regarding frequency of events, the cost of catastrophes, and the number of claims these events cause. PCS analysis is aggregated from a large number of insurers and translated into reports that help insurers, reinsurers, and their customers understand the impact of catastrophes individually and over periods of time.

Gary Kerney is assistant vice president of ISO's Property Claim Services® (PCS®) division.