Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Florida wind ILW traded on Cerchia’s direct risk transfer platform


Swiss-headquartered fintech Cerchia said today that the first risk transfer arrangement has now been traded on its capital markets focused direct risk transfer platform, with a buyer and seller coming together to trade a $100bn PCS trigger Florida wind industry-loss arrangement.

cerchia-logoCerchia’s platform is a peer-to-peer digital tool that allows protection buyers to access institutional capital providers with no middlemen required.

The company has been targeting the industry-loss warranty (ILW) segment as a potential use-case for its technologies, while also looking to source capacity for ILW deals as well.

Now, Cerchia said today that the first digital parametric risk transfer transaction has been completed on its platform.

Michael Rey, CEO and co-founder, explained, “Yesterday, two private companies directly executed a bilateral parametric swap transaction on DRT. Referencing the PCS industry-loss index for named storms in Florida, at an attachment point of $100bn.”

The risk transfer transaction, which likely provides retrocessional reinsurance capacity, was, “Initiated and matched in a decentralized digital marketplace, the cash collateral is securely held in pre-programmed digital escrow accounts, allowing for real-time collateral audits and payouts,” Rey said.

Rey continued to explain, “The pioneering mechanism permitted the protection buyer to bid for its protection needs expediently and find much-needed capacity from an investor at the most competitive costs. The DRT transaction is automated through its entire life cycle, directly observing the PCS index, and instructing settlement payments in case industry loss exceeds the attachment point during the hurricane season.”

Going on to comment that, “We are thrilled to bring product and technology innovation to the risk transfer market that adds true value to all incumbent and new participants. Especially the integrity of collateral is critical to building trust in technology-driven innovation.”

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