RMS adds Japan typhoon to its Paradex industry loss index service

Risk Management Solutions (RMS) have announced that they have added a new peril to their suite of Paradex parametric indices for estimating insured industry losses. They already cover U.S. hurricane, U.S. earthquake, European windstorm, Japan earthquake and now have added Japan typhoon to the service.

The new parametric index utilises event parameters and wind speed measurements from the Japan Meteorological Agency and technology derived from the RMS Japan Typhoon Model. RMS say this makes it the most advanced parametric solution available for transferring typhoon risk.

Paradex Japan Typhoon offers measurements at the city/ward level and by line of business and provides industry loss estimates for the whole of Japan. The index is fully calculated no more than 40 days after a typhoon event occurs.

The index can be used to structure and monitor catastrophe bonds, industry loss warranties and derivative contracts.

Peter Nakada, managing director of RMS RiskMarkets, said ‘Paradex Japan Typhoon is significantly faster than any other authority in providing loss estimates, whilst offering a robust track record when tested against historical events. By building indices for the five major peril regions, we’ve opened the door to perform swaps where both sides can be based on Paradex, and laid the foundations to structure efficient transactions covering multiple perils and regions.’

This new product from RMS should help any re/insurers looking at Japanese typhoon as a possible risk to hedge with a catastrophe bond later this year. The 40 day settlement feature is something we haven’t seen linked to Japanese typhoon risk before so this could spur cat bond interest in Japan.

Read about all of the RMS Paradex products here.