Dual role on Yardstick Re flood cat bond exemplifies One Moody’s strategy: CEO Fauber

Playing a dual role as both the rating agency and risk modelling agency for German insurer Gothaer’s recent EUR 100 million Yardstick Re DAC (Series 2026-1) flood catastrophe bond exemplifies the One Moody’s strategy and the company sees a pipeline of opportunity in insurance-linked securities (ILS), Moody’s Corporation CEO Rob Fauber has explained.

Speaking during the Moody’s second-quarter earnings call yesterday, Fauber’s comments indicate the level of priority Moody’s Corporation places on its catastrophe risk modelling and rating opportunities within the catastrophe bond and ILS market.

Moody’s Rating agency arm assigned a Baa2 (sf) rating to the EUR 100 million Series 2026-1 Class A Notes issued by Yardstick Re DAC, while the Moody’s Analytics Insurance team provided the third-party risk modelling and analysis to underpin the risk transfer transaction.

Given the scale and breadth of the Moody’s Corporation business, the fact this single ILS market transaction was raised as an example of the company’s strategy to bring the strengths of its business units together to serve client opportunities is notable and reflects the opportunity seen.

Rob Fauber, CEO of Moody’s Corporation explained during the earnings call, “I’m happy to share that we marked our re-entry into the insurance-linked securities market in the second quarter, and we served as both credit rating agency and modeling agent on a EUR 100 million flood risk cat bond in the quarter.

“This really exemplifies our One Moody’s strategy in action, combining ratings and catastrophe modeling expertise to play a critical role in addressing the insurance protection gap, which we recently estimated at $375 billion, and by some estimates, could be as high as a trillion dollars.

“Like the other areas that I spotlighted, we are building pipeline here as well.”

Moody’s results show the importance of the insurance vertical and the risk modelling and analytics business to the company, with the Moody’s Analytics Insurance business generating $183 million of revenue in Q2, up 9% on the prior year. Meanwhile Insurance ARR reached $723 million at June 30th, again up 9%. The Insurance vertical revenue figures are the highest for any vertical within Moody’s Analytics division.

Fauber’s commentary from the earnings call further drives home the importance of the catastrophe and insurance risk modelling business to Moody’s, with the CEO giving some colour on insurance-related business wins from the second-quarter.

“Back in June, I attended Exceedance, which is our flagship insurance event, and it drew a record attendance of more than 600 leaders across the property and casualty insurance sector. We announced further enhancements to our cloud-based Intelligent Risk Platform, including our Risk Data Lake, more high-definition models, and new agentic AI capabilities, plus the extension of our casualty solutions. I’ve got to say, I came away feeling very encouraged by our position and opportunity with the global insurance industry.

“Insurance ARR grew 9%, supported by strong demand for catastrophic data models and underwriting solutions delivered through our Intelligent Risk Platform. A good example of that is a large specialty commercial insurer that has historically utilized on-premise modeling and is now piloting the IRP platform. What began as a modeling relationship has the potential to evolve into a broader platform deployment, illustrating how we create value in insurance.

“I want to share a few recent proof points. First, our new capabilities enabled us to grow ARR by nearly 60% with a top three U.S. auto and property insurer. This win reflects strong demand for our geospatial AI integration into property underwriting and broader adoption across personal and business lines, along with continued volume growth.

“This is a particularly important win because it’s going to be a lighthouse customer that will support further expansion into the primary carrier market, where historically we’ve had less penetration. Second, we expanded our relationship with one of the top insurers and reinsurers in the Lloyd’s of London market, and we deepened our penetration into their workflows, including data preparation, pricing, and regulatory reporting, enabling us to grow ARR by 12% off of a multimillion-dollar base. Third, in APAC, we more than doubled ARR with one of the world’s largest life insurance and financial services groups. This insurer now uses our credit value at risk framework as part of their investment and risk decisioning. It’s supported by our credit models and economic scenarios, and it’s a great example of how we’re helping leading insurers connect credit, macroeconomic, and portfolio risk intelligence across their institutions.”

Which all serves to demonstrate the importance of the insurance risk modelling and analytics business to Moody’s. As well as the opportunity the company sees in combining its risk and rating expertise to target more business from the catastrophe bond and ILS market, plus the fact this is seen as an opportunity right the way up to the CEO level.