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Verisk's enhanced U.S. demand surge framework
The enhanced U.S. demand surge framework is new for Verisk Synergy Studio v1.0.0.
Labor disruption hazard
The labor disruption hazard component captures the potential increase in construction labor costs caused by an insufficient local supply of workers following a catastrophe.

Overview of demand surge
Provides an overview of the demand surge frameworks supported in Verisk Synergy Studio v1.0.0.
Verisk's standard demand surge framework
The standard demand surge framework uses the industry loss for a given event, and looks that up in a table which provides demand surge factors based on the level of industry loss experienced.
Verisk's framework
Demand surge was extended to Europe in 2023 through calibration of the demand surge model using available regional economic data, enhancing its ability to capture demand surge impacts across various perils.
Verisk's enhanced U.S. demand surge framework
The enhanced U.S. demand surge framework is new for Verisk Synergy Studio v1.0.0.
- Labor disruption hazard
  The labor disruption hazard component captures the potential increase in construction labor costs caused by an insufficient local supply of workers following a catastrophe.
- Post-event construction cost inflation
  Post-event construction cost inflation captures construction cost increases over the average time required to rebuild and settle claims.
- Integrated demand surge calculation
  The integrated demand surge calculation combines labor market disruption hazard and post-event construction cost inflation components to estimate the total demand surge impact for each model year.
- Demand surge enhancements for U.S. perils
  The enhanced U.S. demand surge model estimates post-catastrophe increases in reconstruction costs for select U.S. perils by modeling construction labor disruption and cost inflation at peril- and state-level resolutions.
Model validation and applications

Labor disruption hazard

The labor disruption hazard component captures the potential increase in construction labor costs caused by an insufficient local supply of workers following a catastrophe.

After large events, local construction labor capacity can become overwhelmed, requiring additional workers to enter the construction workforce, either from the surrounding local region or from out of state. As demand for labor increases, wages rise to attract these additional workers, leading to higher reconstruction costs.

The figure below describes the approach for modeling the labor disruption hazard component. Labor disruption is modeled for each peril and state, and responds to the severity of the largest event loss in a given catalog year. The component is triggered only when a sufficiently large event exceeds a minimum damage density threshold. Damage density is used to normalize industry insurable losses by the total value of exposure in the state. Below this threshold, the labor market is assumed to be able to absorb the additional demand without significant wage effects. Once triggered, the resulting labor shortage affects all events in the same state during that catalog year, reflecting a sustained disruption to the construction labor market throughout the catalog year.

Figure 1. Conceptual model for the labor disruption hazard component of the enhanced U.S. demand surge