AIR Worldwide First to Model $10 Billion in Catastrophe Bonds

AIR Worldwide Corp. (AIR), a Boston provider of risk modeling software and consulting services, announced that it has provided risk modeling and analytical services for more than $10 billion dollars (USD) in insurance-linked securities since 1996, and more than 56% of total issuances since 2007.

“Risk modeling is a key element in the risk assessment of a catastrophe bond for issuers, rating agencies and investors alike,” says Augustin Gas, head of ILS and alternative retrocession at French reinsurer SCOR. “AIR’s superior methodology and modeling expertise is crucial in providing the underlying analysis detailing the risk to the proposed bond. AIR also provides exceptional service throughout the process and delivers the analysis results within the scheduled timeframe.”

In 2008, AIR provided risk modeling and analytical services for 70% of the catastrophe bond capital issued. In 2009, AIR has been the modeling and calculation agent for all catastrophe bonds issued to date, including Atlas V, East Lane Re III Ltd. Series 2009-1, and Mystic Re II Ltd. Series 2009-1, totaling $575 million in new issuances.

“Atlas V was the first catastrophe bond to come to market in six months, and is the first in a new generation of cat bonds,” says Erik Manning, director at Deutsche Bank. “AIR was also involved in last year’s pioneering Blue Coast Ltd. bond, which used the recently developed LAZR (Long-Term Aggregate Zonal Reinsurance) hybrid trigger that combines state-level PCS industry loss estimates and AIR’s model losses by county.”

AIR has modeled the risk profile for securities covering North America, Europe and Asia while protecting against such perils as tropical cyclones, earthquakes, extratropical cyclones (winter storms), severe thunderstorms and wildfires. These instruments employ a variety of trigger types, ranging from parametric, indemnity and PCS industry loss index-based to modeled loss, and also include hybrids such as the combination of PCS industry loss and modeled loss.

“Since modeling the first large-scale catastrophe bond in 1996, AIR has modeled 47 transactions, and is the modeling and calculation agent for over 50% of currently outstanding catastrophe bond issuances,” says David Lalonde, SVP at AIR Worldwide. “With models covering more than 50 countries worldwide and experience working with all types of bonds, AIR continues to be the modeler of choice for companies pursuing potential securitization options.”

In addition to providing the underlying risk analysis, AIR provides support for the offering materials and for the investor and rating agency meetings. AIR also provides investors with tools to evaluate the risk, including documentation concerning its models, modeling assumptions, what-if analyses of historical events, and breakdowns of risk by region and peril.