AIR Worldwide launches new way for U.S. reinsurers to calculate insurance-to-value

AIR Worldwide Corporation (AIR) has a new service available to assess insurance-to-value (ITV) of U.S. residential property portfolios for reinsurance contract renewals.
The challenges insurers face in maintaining up-to-date replacement values are well known in the industry, said Chris Harris, the chief underwriting officer at Montpelier Re. In the past, we have compensated for this bias by applying an industry-wide adjustment factor, but the wide range of undervaluation in our cedants portfolios uncovered by AIRs analysis is leading us to rethink this approach.
Moving forward, AIRs ITV analyses will help us better quantify differences in insurance-to-value from cedant to cedant.
Insurers take different approaches to estimating insurance-to-value, but often use valuation tools only for underwriting new business, AIR noted in a press release.
Significant increases in re-build costs over time and improvements to individual properties that are not reported may negatively impact the overall ITV of the insurers portfolio, AIR notes.
AIRs ITV analyses are conducted using ISO HomeValue and the ISO PushPin database. The only data required are street addresses of individual properties and ISO PushPin adds specific property information for individual properties. It is a database of objective and detailed residential property data on more than 70 million properties in the United States that can return as many as 17 property features for individual addresses.
These property features include total living area, year built, and building type, among others. This data is fed into ISO HomeValue to estimate replacement costs.
Most replacement cost estimators require building-specific information such as total living area, year built, and other property specific building information to reliably estimate replacement costs, said Uday Virkud, senior vice president at AIR Worldwide. But such details are seldom available for reinsurance submissions, which typically only include street addresses for each risk. AIRs ITV service, with its unique ISO PushPin database, is specifically designed to provide realistic replacement cost estimates with just address information.