Fermat adopts ARA hurricane model to help refine evolution of risk transfer

Fermat Capital Management, one of the largest specialist investment managers of catastrophe bonds and insurance-linked securities (ILS) assets, has licensed the Applied Research Associates, Inc. (ARA) HurLoss hurricane model, as it seeks to add new insights from additional views of risk.

John Seo, co-founder and managing director at Fermat Capital Management, explained, “The insights we gain from ARA will help us refine the continuing evolution of the transfer of risk.”

ARA’s HurLoss U.S. Hurricane model allows insurance and reinsurance underwriters, ILS managers and brokers, to gain additional insights to inform their underwriting and portfolio management decisions.

ARA’s hurricane model has been both published and peer reviewed, while being used as the basis for structural design in hurricane-prone states since 1998 (ASCE 7) and was first accepted for use in Florida in 2000 (FCHLPM, FLOIR, FLDCA).

Available via the Nasdaq Risk Modelling for Catastrophes, an independent multi-vendor risk modelling solution for the re/insurance industry, powered by the Oasis Loss Modelling Framework, HurLoss is a less-frequently discussed catastrophe model in the ILS community, with the industry often relying on just the main vendor models of AIR and RMS.

Fermat Capital Management has signed an agreement to license the HurLoss hurricane risk model, as it seeks out additional sources of data to help inform its investment decisions in catastrophe bonds and ILS.

“ARA is thrilled to have a client with the pioneering track record of Fermat in the ILS market space,” George Freimarck, business leader for Catastrophe Modeling at ARA, explained.

“We are looking forward to partnering with Fermat to gain new insights for the peril of hurricane, insights which will enable Fermat to manage and grow their business.”

“ARA’s engineering, first principles-based modeling provides us with an important perspective on the critical hazard of wind.” added John Seo of Fermat.

“We are impressed by the transparency of ARA’s model, and the accessibility of their team. We expect new understanding with the addition of the HurLoss model which we will be able to pass on to our investors.”

Having access to a wide-range of scientifically rigorous catastrophe risk models is important in ILS and reinsurance, allowing underwriters and investment managers to inform and develop their own views of risk, taking inputs from multiple trusted sources.

John Seo of Fermat Capital Management is moderating a discussion panel at our upcoming ILS NYC 2023 conference, held on Feb 10th in New York. Register here to attend the event.