The Demand Surge catastrophe peril analysis option inflates loss results to reflect the increased cost of labor and materials following a major catastrophe. As the industry loss rises, so does the cost to repair and replace properties damaged in the event. The greater the industry loss is for an event, the greater the demand surge factor is that is used in the calculations.

Touchstone comes with a standard set of demand surge curves for specific regions. Each region can have one standard and one custom demand surge curve. In the Administration Console, administrators can create custom demand surge curves for each of these regions and can set the default curve for use during loss analyses. No one can modify the AIR standard demand surge curves. Administrators can assign permission to other users to modify the custom demand surge curves from Touchstone.

Note the following characteristics of demand surge in Touchstone:

•       Demand surge does not apply to workers' compensation exposure data.

•       Demand surge does not apply to Coverage C or offshore locations.

•       For the AIR Hurricane Model for the United States, demand surge is triggered by insurable damage, rather than insured damage alone. That is, the AIR demand surge function is triggered by industry losses representing 100% of wind losses and 100% of storm surge losses.

•       The default demand surge trigger for Alaska and Hawaii is applied to events that result in more than three billion dollars of industry-insurable loss.

•       The default demand surge trigger for the United States is applied to events that result in more than six billion dollars of industry-insurable loss.

•       For the U.S., Touchstone applies demand surge based on aggregate loss (sums of losses in a year).

•       For all other modeled countries, Touchstone applies demand surge based on the occurrence loss. You can find a list of modeled countries in the tCountry table in the AIRReference Database.

To specify demand surge options:

1.     Create a new catastrophe peril analysis.

2.     In the Analysis Settings pane, select the Demand Surge "With" option to run the analysis with demand surge enabled.

3.     Click Select Custom Curve.

The Demand Surge Options dialog box displays the demand surge regions associated with the event set that you have selected for the analysis. For each applicable demand surge region, you can select either the standard demand surge curve or the custom curve, if one has been created for the region.

4.     To select a custom curve for a region, select the check box in the Custom column for the desired region. Alternately, if the administrator has set a custom curve as the default demand surge curve for a region, clearing the check box in the Custom column for this region automatically selects the associated check box in the Standard column.

5.     Click OK.