Risk Transfer (Reinsurance and Securitization)

Risk Transfer (Reinsurance and Securitization)

Catastrophe exposed organizations, including insurance and reinsurance companies, are becoming increasingly innovative in their approach to transferring risk. AIR offers consulting services to issuers of and investors in the increasingly diverse array of reinsurance and insurance-linked securities being structured and marketed today.

Reinsurance Program Analysis

A reinsurance program analysis provides our clients with an accurate quantification of the risk being ceded and an understanding of the nature of their risk profile on a net retained basis. This information assists our clients in evaluating the role of reinsurance in catastrophe risk management strategies. It also helps them better understand the theoretical pricing of risk transfer alternatives. As reinsurance products become increasingly customized, AIR has all the tools necessary to effectively analyze geographic carveouts, industry-based or company-based based triggers, contracts of varying duration, and inuring conditions.

Securitization Services for Issuers

When companies make the decision to issue an insurance-linked security, they choose AIR to provide modeling support because of our unparalleled experience in this arena. AIR modeled the first large-scale catastrophe bond in 1997. Since then, as the market for these securities has grown and matured, AIR consultants have modeled the risk profile of bonds of ever-increasing complexity that protect against losses from hurricanes, earthquakes, typhoons, extratropical cyclones (winter storms), severe thunderstorms and wildfires in regions worldwide. In fact, AIR modeling has supported nearly 75% of the risk capital raised through these transactions.

AIR plays a critical role in the success of a transaction. Our consultants perform the underlying risk analysis for the security—an analysis fundamental to the very structure of the transaction and to its pricing strategy. AIR presents the results of detailed sensitivity analyses of all major components of the underlying catastrophe models to securities rating agencies, upon whose due diligence investors rely. AIR also provides support for the development of offering materials, in which both the modeling methodology and model results are described in detail, and we participate in “road shows”, where the structure of the transaction and quantification of the risk is presented to potential investors. AIR is also available to perform any post-issuance analysis in cases where resets are necessary to maintain a constant level of risk over the life of the bond; in the case of transactions triggered by modeled losses, AIR performs the post-event calculation after a triggering event has occurred.

With their intimate knowledge of AIR’s models covering more than 90 countries worldwide and experience working with all types of bonds, AIR’s highly trained and experienced consulting team can help companies understand their global exposure to catastrophe risk and explore potential securitization options.

Securitization Services for Investors

AIR’s CATRADER® is the industry standard solution for modeling portfolios of insurance-linked securities. AIR complements our software with a Reanalysis Service that enables investors to quickly and accurately evaluate the marginal impact of newly issued securities on an existing portfolio. When a new insurance linked security is issued, investors can depend on AIR to provide all the necessary information to enable analysis of even the most complex structures in a timely fashion—typically within just days of receiving the offering circular.

While many investors may prefer to bring our risk-modeling solutions in house, AIR also offers a variety of consulting services for clients seeking assistance. These range from analyzing the risk and correlations in current or proposed portfolios, to determining optimal asset allocation strategies.

Portfolio Optimization

Portfolio Optimization

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