Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

AIR Worldwide reaches $25 billion of catastrophe bond issuance modeled


Risk modeller AIR Worldwide has now been involved in the issuance of over $25 billion of catastrophe bond issuance, with risk modelling services provided to over 115 cat bond transactions since the market launched back in 1996.

This milestone was reached with the successful completion of the Nakama Re Japanese earthquake catastrophe bond this week. Since the beginning of 2009 AIR Worldwide has been risk modeller on more than $15 billion of catastrophe bond issuance. This year alone, 17 out of 22 property catastrophe bonds issued were modelled by the firm. In 2012 AIR was even more dominant with 24 out of 25 property cat bonds modeled.

“This significant milestone is marked by the September closing of the Nakama Re Ltd. catastrophe bond issuance, which provides $300 million of earthquake cover for Zenkyoren in the sponsor’s first ever indemnity-triggered catastrophe bond,” commented Rob Newbold, senior vice president at AIR Worldwide. “By leveraging our vast experience working with all types of structures covering a wide variety of perils and all regions of the world, AIR continues to be the modeller of choice for companies pursuing securitization options.”

Highlights in AIR’s history of modelling catastrophe bond transactions include:

  • MultiCat Mexico 2009 Ltd., which represented a partnership between the World Bank and Mexico to help manage catastrophe risk from multiple perils;
  • Atlas V, the first catastrophe bond issued after the 2008 credit crisis and one that used a hybrid trigger combining state-level PCS® industry loss estimates and AIR modeled losses by county;
  • the first catastrophe bond to use the innovative Verisk Catastrophe Index® as the trigger mechanism; and
  • 16 consecutive years supporting the Residential Reinsurance Ltd. Series sponsored by USAA.

AIR has benefitted from the market’s reaction to the launch of the RMS 11 risk model, which saw such a large change in the view of risk on many cat bonds that sponsors quickly moved to use the AIR model instead. Since then it has been hard for RMS to regain traction in property catastrophe bond issuance, leaving AIR to dominate this sector in recent years.

“As the catastrophe bond industry has grown, so has the need for a trusted ally who can provide sophisticated analytics on a global scale,” said David Lalonde, FCAS, FCIA, MAAA, senior vice president at AIR Worldwide. “AIR is pleased to offer the modeling services necessary to help organizations diversify their risk transfer strategies.”

AIR Worldwide’s models and services are also widely used on the investor side of the catastrophe bond and ILS market, with its CATRADER software widely used for analysing and managing the risks associated with portfolios of cat bonds, ILS and reinsurance-linked investments.

CATRADER helps investors make decisions about which bonds to hold, how to diversify and manage a portfolio, overall portfolio exposures and how new investments impact their portfolio.

Recently, investment manager Schroders, which acquired an interest in established ILS investment manager Secquaero recently, began using CATRADER as a tool to help it understand and manage catastrophe bond and ILS risks.

“Diversification is an area of focus for us, and AIR’s CATRADER supports the analytics we use for constructing an optimal portfolio that may include catastrophe-linked instruments with a range of trigger types, including indemnity, index, and notional portfolio-based triggers,” commented Daniel Ineichen, portfolio manager insurance-linked securities at Schroders. “CATRADER also makes it easy to quantify the correlations that exist across multiple catastrophe-linked investments within a portfolio, which allows us to fine-tune our desired risk/return profile.”

Our catastrophe bond Deal Directory details the risk modeller responsible for every cat bond transaction since the market began.

Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.