Specifying Demand Surge Options

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 Country table in the AIR Reference database.