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The landscape of risk
transfer alternatives has evolved significantly in recent years. Companies now have the option of turning to the
capital markets for supplemental catastrophe protection. The
capital markets, in turn, have viewed the introduction of the insurance-linked
security as an opportunity for the development of a new market, with the
added attraction that so-called "cat bonds" are largely
uncorrelated with other financial
instruments.
When companies make the decision to issue an insurance-linked security, they choose AIR to provide modeling support because of the considerable experience we have amassed in this area. AIR has supported over 60% of the risk capital raised through these transactions, including the first securitization of a reinsurance portfolio, of a large-scale insurance company portfolio, of a New Madrid earthquake portfolio, and of a portfolio consisting almost entirely of large commercial and industrial properties. Investors rely on rating agencies to perform research and due diligence on the catastrophe modeling technologies used to support these transactions. During the course of such review, AIR models and their underlying assumptions become the subject of intense scrutiny and testing. As a result of our extensive involvement in the process, AIR modeling methodology and analyses are widely known and generally accepted within the rating agency community. We have also developed relationships with the investor community, resulting in a continuity of process and approach that benefits our clients as they evaluate and use the capital markets to transfer risk. AIR has been selected to support transactions covering all major perils in the US and other regions of the world.
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