Specialist catastrophe bond and insurance linked investment manager Fermat Capital Management has implemented risk modeller AIR’s Touchstone platform to perform analysis on its catastrophe-linked ILS financial instruments.
Fermat is one of the largest investors in catastrophe bonds in the insurance-linked securities (ILS) market and has been a user of AIR’s CATRADER product since 2006. The ILS manager has now moved over to AIR’s new Touchstone platform, which AIR says “marks the evolution of catastrophe modeling solutions for the ILS market.”
“We pride ourselves on being the first investment management company to use a detailed policy-level modeling solution from AIR to better manage our portfolio of insurance-linked securities (ILS),” commented John Seo, co-founder and managing principal at Fermat Capital Management. “Through Touchstone, our access to granular, detailed policy-level exposures will be analyzed to provide a richer, more robust set of detailed catastrophe risk insight. Further, Touchstone will seamlessly integrate with our own proprietary CatAPM price model for use in continuous-time trading and portfolio optimization of ILS.”
AIR released version 2.0 of its Touchstone platform in July and says that it is being rapidly deployed throughout the reinsurance sector and within the ILS market as well, where it can offer new opportunities for ILS investors to perform detailed modelling of their assets and portfolios.
“Touchstone offers a suite of tools for asset managers like Fermat to truly understand and own the risk, while providing the flexibility, transparency, and performance needed to manage catastrophe risk in the current business environment,” Rob Newbold, senior vice president at AIR Worldwide, said. “As many asset managers find attractive opportunities in the broader space that give them access to detailed exposure data, Touchstone allows them to perform detailed loss analysis of that exposure. They can better understand and interact with global exposure data from a high-level overview all the way down to the street level, and with dramatic performance improvements over previous catastrophe modeling solutions.”
Newbold continued; “In addition to catastrophe loss analysis, Touchstone offers tools that give asset managers access to exposure data quality assessment, high resolution hazard visualizations, and robust geospatial analytics. Those tools provide significant analytical power in today’s market. And with Touchstone’s open platform, asset managers can be confident knowing that Touchstone will evolve to meet their needs no matter how the market changes.”
As risk models and analytics tools improve and become ever more advanced ILS managers and ILS investors benefit from an improved granularity in their view of the assets they allocate capital to. This can aid investment decisions and make for more effective management of their ILS portfolios, ultimately providing the kind of insight which can help to improve investment returns.