CatVest Petroleum Services LLC, who launched last year offering oil spill risk modelling and transfer services (specifically the creation of parametric triggers to allow for oil spill ILS issuance), have today announced the launch of a new model which targets more comprehensive energy industry losses. The CatVest EnergyRisk model is a suite of tools which allows CatVest to accurately analyse, estimate, calculate and index catastrophic energy losses.
The press release from CatVest says that their patent pending EnergyRisk model can be used to model losses from physical damages, operators extra expenses, business interruption, incident response costs, third-party losses and natural resource damages for the offshore and onshore oil, gas and chemical industries.
The EnergyRisk model has been designed to allow for industry loss indices to be created for the energy sector. The resulting energy industry loss indices can be used in the design and structuring of capital markets risk transfer instruments such as ILS and industry-loss warranties.
CatVest have already created industry loss indices for the North Sea and Gulf of Mexico. They say that their model is capable of creating these indices for any geographic region of the world to assist in the quantification and measurement of catastrophic energy losses. CatVest’s website also discusses their service offering as calculation agent for any transactions which require one.
These indices offer re/insurers a new way to transfer the risks of major offshore energy disasters through cat bond type ILS structures or ILW’s. We assume it is also relevant as a mechanism to assist with more accurate traditional reinsurance and retrocession modelling and risk quantification needs as well.
CatVest managing partner and chief scientist Timothy J. Reilly said; “The CatVest EnergyRisk Model provides the objective and accurate energy loss risk analyses and post event loss calculation procedures needed by the Oil and Gas industry to facilitate cost effective insurance coverage.”
CatVest are currently working on a large North Sea region industry-loss warranty transaction with a global broker on behalf of a major global reinsurer.
Given the magnitude of the potential exposure to catastrophic events in the offshore (and onshore) energy industry we expect that these indices and this modelling capability will be welcomed by insurers and reinsurers who deal with these risks, particularly as it can help them transfer those risks to capital market investors.Disclosure: Artemis’ owner Steve Evans works with CatVest Petroleum Services LLC as an advisory partner.