Newark, California-based Risk Management Solutions (RMS) announced that it has provided the risk analysis to Nissay Dowa General Insurance Co., Ltd. and its counterparty, Swiss Re in support of the Fujiyama Ltd. $70 million securitization of potential earthquake losses in Japan.
The securitization covers a three year period and is based on “a parametric structure in which losses to the bond are directly linked to earthquake event parameters published by the Japan Meteorological Agency (JMA),” formulated by RMS working with Nissay Dowa and Swiss Re.
“The new parametric ‘box’ structure fits Nissay Dowa’s exposure and covers seismic sources giving rise to earthquake events affecting exposure in CRESTA zone 5 (Tokyo, Chiba, and Kawasaki) as well as the neighboring prefectures to the southwest, Shizuoka and Yamanashi,” said RMS.
” Ninety-seven percent of the issue’s volume is made up by variable rate notes, which are exposed to trigger events in two boxes covering zone 5 as well as to large events (M>=8.1) inside a third box covering Yamanashi and Shizuoka on a second event basis. Three percent of the volume is issued in the form of Preference Shares, which are junior to the notes and as such are exposed to any first event across the entire trigger area,” it continued.
This new securitization is a good example of the increasingly sophisticated parametric models being created by catastrophe risk management consulting companies. In addition to RMS, Oakland’s EQE with its EQECAT models and and Boston-based Applied Insurance Research (AIR) provide similar services.
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