Risk Management Solutions (RMS) provided risk modelling, analysis and acts as calculation agent for the recently closed $200m Golden State Re Ltd. catastrophe bond. The innovative deal provides cover for workers compensation claims that result from earthquakes and as such the modelling aspect is unique in the cat bond market and features payout factors based on type of injury and the trigger is time-of-day sensitive as well. The full press release from RMS on their involvement in this transaction is below.
RMS Performs Risk Analysis for U.S. Earthquake Casualty Catastrophe Bond
Newark, Calif. – December 14, 2011 – Risk Management Solutions (RMS) has completed the expert modeling analysis in connection with the securities offering undertaken by Golden State Re Ltd., a special purpose reinsurance company domiciled in Bermuda. The securities offering is intended to finance a separate reinsurance transaction providing $200 million of collateralized coverage against U.S. earthquake casualty over three years for the State Compensation Insurance Fund, and is the first of its kind to cover workers compensation.
The trigger for the reinsurance arrangement is based on modeled notional losses calculated by RMS using ground motion data from the U.S. Geologic Survey. To manage the temporal variability inherent in workers compensation risks, RMS will use earthquake time-of-day to estimate the exposed population of workers.
“The use of a modeled loss trigger with a time-of-day component illustrates how a relatively complex risk, like earthquake casualty, can be transferred transparently and efficiently to the capital markets,” commented Peter Nakada managing director of RiskMarkets, RMS’ dedicated insurance-linked securities (ILS) team. “We’re excited to have the RMS® U.S. Earthquake Casualty Model used in this innovative transaction, and to have helped bring the deal to market.”
Full details of this cat bond, including some further details on the modelling and trigger structure can be found in our Deal Directory.