Coverage Triggers

Indices from the PERILS Industry Loss Index Service can be used as coverage-triggers in insurance-linked securities (ILS) and industry loss warranties (ILW). For the purposes of consistency, the assessment of default probabilities (expected loss) of such risk transactions is best done with the PERILS industry exposure portfolio. The latter can also be used for mapping deviations of a given insurance portfolio from the market portfolio. The results of this analysis can be used to tailor coverage triggers with minimal basis risk, e.g. by adjusting the industry loss index with geographic or occupancy type weightings. Tailor-made industry loss indices are available per transaction and can be ordered from the PERILS Industry Loss Index Service.