Boston-based AIR Worldwide Corp. (AIR) reported that it has provided risk modeling and analytical services for over 80 percent of the $2.1 billion of catastrophe bonds issued to date in 2009.
AIR said it has been the modeling and calculation agent for many significant ILS transactions this year, including the groundbreaking “MultiCat Mexico 2009 Ltd.,” a partnership between the World Bank and Mexico to help manage catastrophe risk from multiple perils more effectively.
In 2009 to date, AIR Worldwide has modeled the risk profile for eight securities covering North America and Europe, providing cover for such perils as tropical cyclones, earthquakes, extratropical cyclones (winter storms), severe thunderstorms and wildfires. The instruments employ a variety of trigger types, ranging from parametric to indemnity, modeled loss and LAZR (Long-Term Aggregate Zonal Reinsurance).
“Using a parametric trigger structure, MultiCat Mexico 2009 will provide cover against multiple perilsâ€”losses from certain size earthquakes as well as Pacific and Atlantic hurricanes,” said Salvador Perez, Risk Analysis Director, Ministry of Finance, Government of Mexico. “AIR’s models provide the foundation for modeling catastrophes in areas like Mexico that are seeking to use alternative risk transfer mechanisms to place their risk directly in the financial markets.”
AIR said it also supported the “Atlas V” transaction, the first catastrophe bond issued after the 2008 credit crisis. The transaction uses the recently developed LAZR hybrid trigger, combining state-level PCS industry loss estimates and AIR’s model losses by county. The Atlas V structure provides investors with the clarity of a PCS trigger, while disaggregating loss estimates using AIR’s post-event loss calculation methodology to enable the issuer to manage basis risk at a more granular level.
Since acting as the modeling agent for the first catastrophe bond in 1996, AIR says it has participated in many of the insurance industry’s landmark securitization transactions. Including participating in $1.7 billion of the $2.1 billion of catastrophe bonds issued thus far in 2009, AIR has acted as the modeling agent for over $10 billion in insurance-linked-securities since 1996.
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