Moody’s RMS announces parametric risk partnership
Moody’s RMS has announced a new collaboration with reinsurance brokerage firm Augment Risk, to develop the market for parametric risk transfer.
With the insurance industry striving to better understand how factors such as extreme weather, climate change, and other natural peril catastrophes impact communities around the world, parametric solutions are increasingly viewed as a realistic and effective alternative to more traditional forms of catastrophe protection, the company said.
The collaboration between Moody’s RMS and Augment Risk will help serve a range of clients including large corporates with captives, Lloyd’s syndicates, and insurance-linked securities funds who are all looking at the range of benefits that parametric reinsurance solutions can offer. The collaboration will focus on a cross-section of perils including windstorms, earthquakes, wildfires, and severe convective storms.
Ben Brookes, managing director, Moody’s RMS, said: “We believe parametric risk transfer products will play an increasingly important role in managing risk. Parametric risk transfer offers the combined benefits of high transparency and complete risk disclosure, plus the prospect of rapid loss settlement. We look forward to continuing to open up significant market growth by increasing the use of sophisticated risk models and basis risk analytics as enablers.”
Kurt Cripps, global head of parametric at Augment Risk, added: “Working with Moody’s RMS will allow our clients access to some of the most advanced risk analytics capabilities in the world and will develop modelling specifically for parametric reinsurance protections. For index-based solutions to grow as an asset class the modelling must underpin the view of risk from an empirical and stochastic standpoint.”
“Furthermore, demonstrating how the product responds to certain perils is key for achieving solvency benefits for carriers. As this embryonic market establishes itself it is evident that buyers and sellers will require absolute transparency on the index and the actual and projected losses for a given risk.”
“Risk is more extensive and complex than ever before, and this collaboration will allow our partners to make more informed, accurate, efficient, and confident risk management decisions, armed with the latest models that the markets use to assist in pricing parametric risk. By keeping clients fully informed, we can achieve more consistent prices and help normalize this exciting market. For too long, the parametric market has been on the periphery of the natural catastrophe market. We believe that now is the time for parametric solutions to truly challenge traditional reinsurance buying habits.”
The Moody’s RMS and Augment Risk collaboration will help deliver well-structured, consistent risk transfer submissions to the market, by enabling placements to be syndicated among various capital sources.
Andrew Matson, chief executive of Augment Risk, said: “We are committed to providing bespoke solutions that not only protect our clients but, more importantly, allow them to grow and maximize their enterprise value. For us, this collaboration is an important development as investors seek more accurate and specific modelled outputs. As one of only a few specialist brokers in this space, Augment Risk is delighted to have parametric solutions as a cornerstone of our execution strategy and this collaboration is further recognition of our absolute determination to build a differentiated and relevant reinsurance broker.”
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