Fitch Utilizing AIR Worldwide’s CAT Models for Industry Capital Analysis

October 17, 2005

To help assess the capital adequacy and financial strength of insurance companies in North America and Europe, Fitch Ratings now utilizes AIR Worldwide’s (AIR) catastrophe risk management systems to assist in evaluating insurers’ natural catastrophe risk. This is the first time a rating agency will integrate a third-party catastrophe modeling system into the proprietary models it uses to assess the financial strength of an insurer or reinsurer.

“As part of the development of our proprietary capital model, we found that AIR provided an integrated solution to assist us in capturing the exposure and risk associated with natural catastrophes,” said Jeff Mohrenweiser, senior director at Fitch Ratings and head of its capital modeling project. “Their advanced science, technology, and modeling flexibility will further enhance the efficiency and thoroughness of our current risk analysis processes.”

Fitch has implemented AIR’s CATRADER system, which supports a wide range of risk information at various levels of detail. Companies are reportedly encouraged to supply Fitch with Company Loss Files, or CLFs, produced by AIR’s CLASIC/2 catastrophe risk management system. CLFs provide the most detailed representation of a company’s catastrophe risk profile. Absent these files, Fitch can utilize CATRADER with public premium data or aggregate sums insured data in the UNICEDE/2 format, along with estimated reinsurance programs and other industry inputs, to assess an insurer’s natural catastrophe risk.

“The 2004 hurricane season and Hurricane Katrina have highlighted the fact that catastrophe risk management is an important component of a company’s risk and capital management strategy,” said Uday Virkud, senior vice president at AIR. “CATRADER will enable Fitch to quickly and consistently incorporate the important catastrophe component into their capital model to attain a reliable assessment of each company’s ability to weather the impact of catastrophic events. “

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