New Entrants Adopt AIR Catastrophe Models to Better Manage Portfolios of ILS and Reinsurance Contracts

Insurance NewsBOSTON, March 1, 2012 – Catastrophe risk modeling firm AIR Worldwide (AIR) announced that investment companies such as ILS Capital Management are leveraging catastrophe modeling solutions to better manage portfolios of insurance-linked securities (ILS) and reinsurance contracts.

“We selected AIR as the main model for our risk management architecture because it is the best solution for modeling a diverse portfolio of ILS and traditional reinsurance contracts,” said Tim Tetlow, president and COO of ILS Capital Management, Ltd. “Its event-driven approach is critical in allowing portfolio correlation and seasonal aspects of underlying region-perils to be properly handled, important factors in managing accumulations and providing investors accurate net asset values. ILS Capital incorporates this framework in its proprietary ReSolution(c) system, which integrates and manages catastrophe risk in real time across multiple catastrophe models.”

As the risk transfer market continues to evolve and reinsurance and ILS markets come together, many investors need a software application that can also model the complete range of reinsurance contracts in use today. For more than a decade, the industry has recognized AIR’s CATRADER(r) as the industry standard application for modeling a wide variety of reinsurance contracts. And more than 90 percent of the top 25 worldwide reinsurers use the software to assess traditional reinsurance submissions and manage their portfolios of catastrophe risk. By modeling all of a company’s catastrophe-linked investments and reinsurance contracts within the same software, AIR enables portfolio managers to understand the catastrophe risk associated with each instrument in a combined portfolio of insurance-linked securities and traditional reinsurance contracts.

Using AIR’s CATRADER software, potential investors can analyze catastrophe bonds and other instruments such as industry loss warranties (ILW) as they are announced, so they can accurately assess the risk before deciding to invest. CATRADER also includes a comprehensive database of currently active property insurance-linked securities, to allow users to identify trading opportunities. CATRADER provides investors the flexibility they need to accurately model financial instruments involving any combination of payout triggers.

“AIR’s approach to model and software development is consistent with values that we believe are essential to understanding and managing the underlying risk,” continued Tetlow. “AIR delivers scientifically advanced models using a robust oversight process that ensures its models reflect basic principles of the underlying hazard to yield reasonable results.”

About AIR Worldwide
AIR Worldwide (AIR) is the scientific leader and most respected provider of risk modeling software and consulting services. AIR founded the catastrophe modeling industry in 1987 and today models the risk from natural catastrophes and terrorism in more than 90 countries. More than 400 insurance, reinsurance, financial, corporate, and government clients rely on AIR software and services for catastrophe risk management, insurance-linked securities, detailed site-specific wind and seismic engineering analyses, agricultural risk management, and property replacement-cost valuation. AIR is a member of the Verisk Insurance Solutions group

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