Marsh to offer index-based earthquake and windstorm insurance solution

by Artemis on June 9, 2011

Marsh have announced that they are to begin selling the County Weighted Industry Loss (CWIL™) solution, which was developed in 2010 by Guy Carpenter as an index-based reinsurance contract issued by Nephila Capital. CWIL is now available to Marsh clients with exposure to U.S. windstorms or earthquakes and European windstorms.

CWIL allows end-users to hedge their risks at a county level rather than state wide or industry wide losses. It uses loss data from Property Claims Services broken down to a county level which allows companies to hedge earthquake and windstorm risks at a much more granular level. We’re not sure what data source CWIL uses for European windstorm risk (possibly PERILS).

By allowing for granular hedging of risks the CWIL product seeks to lower basis risk and allow companies to better match their hedging strategy to their portfolio of risk. This is particularly important in states such as Florida where the potential for a major loss is much higher.

“Earthquake and windstorm insurance coverage has traditionally been difficult and expensive to obtain for organizations with significant exposures, and that is only being exacerbated in today’s transitioning property catastrophe market,” said Quentin Hills, global head of Marsh’s Financial Risk Products Practice. “Working with Nephila and Guy Carpenter, Marsh has adapted the CWIL index-based solution to provide clients with access to dedicated capital that previously had only been available to insurers and reinsurers.”

The CWIL product can be structured as a stand alone solution or structured to complement an existing property program.

“Not only can CWIL be executed quickly, but accessing dedicated capital from Nephila also reduces an organization’s exposure to insurance market cycles and diversifies counterparty exposure,” Mr. Hills added.

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