Verisk's enhanced U.S. demand surge

Three models have been updated with this framework:

• Verisk Tropical Cyclone Model for the United States
• Verisk Winter Storm Model for the United States
• Verisk Inland Flood Model for the United States

This framework builds on the enhanced framework first implemented for Europe in 2023. That framework uses the same two components—cost inflation and labor disruption, but with additional granularity and other enhancements.

In that implementation, cost inflation is dynamic. Instead of a single value for cost inflation per country, it varies by state based on the industry return period. Higher return periods generally result in greater loss impacts and longer rebuilding times, which in turn lead to a higher impact of inflation on final losses.

You can adjust the range of cost inflation percentages for a range of return periods in the Demand Surge section of the Admin Console workspace in Verisk Synergy Studio, on a per-peril and state-by-state basis.

Labor disruption in the new implementation works about the same as the implementation previously described here for Europe, but with a couple of key changes. First, rather than a single labor disruption function for each country, there are separate functions for each state within each model’s domain. The other major change is that cost inflation is included and impacts ground-up losses even if damage density in a given year is insufficient to drive non-zero labor disruption.

The final demand surge factor for a given event and state is calculated as 1 + (cost inflation percentage) + (labor disruption). This factor is then applied to all ground-up losses within a state for a given event. This is also a change from previous U.S. demand surge methodologies in that there will now be separate factors per event and state, offering the user higher granularity in how demand surge works and a more realistic view of demand surge in their results.

Finally, this version of the enhanced framework has different sets of factors by coverage. Like the legacy/standard industry loss-based framework, there is a set of factors for buildings (coverages A and B), another for time element (coverage D), and a flat factor of 1 applied for contents (coverage C). With its increased granularity and support for customization, we will adopt this framework for future updates to demand surge functions across models.