Increasing Concentrations of Property Values and Catastrophe Risk in the US
April 13, 2015
Residential, commercial, and industrial property values in the US continue to increase faster than GDP growth and the general rate of inflation. According to KCC estimates, insured property values increased by nine percent from 2012 to 2014.
This paper explains why the PMLs can give a false sense of security and suggests new risk metrics— Characteristic Events (CEs)—for monitoring exposure concentrations. The CEs help companies better understand their catastrophe loss potential so they can avoid surprise solvency-impairing events. Because it’s likely that catastrophe loss potential will continue to grow in already concentrated areas, insurers require multiple perspectives on increasing catastrophe risk.