Uncertainty in demand surge

There are few historical data points with which to develop and validate a demand surge function. For extreme events that make up the tail of the distribution, there are none. The data that is available presents challenges due to differences in reporting practices and timeliness. Also, because much of the available data is reported quarterly, it can be difficult to distinguish the effects of events that occur in close geographic and temporal proximity, or from other inflationary pressures not related to the events themselves.

There are additional challenges to modeling Coverage D, as losses are rarely reported separately for this coverage and the available cost time series data tends to focus solely on the effects on building materials and labor. Information regarding delays in reconstruction is sparse and chiefly anecdotal.

However, these challenges can be addressed in a number of ways. Verisk has performed original research and analysis based on information available in academic, construction, insurance, business, and actuarial trade publications. In addition, we use the opinions of their construction experts, who have 25 years of industry experience, as well as experts in economics, statistics, and actuarial science.

Verisk demand surge currently implemented in the Verisk software systems is the result of 15 years of research and refinement. That research is still ongoing, and, as new data becomes available, we will make additional refinements as appropriate.