Catastrophe risk modeller Moody’s RMS has joined forces with reinsurance broker Augment Risk to support the market for parametric risk transfer through placements syndication among different capital sources.
Through this collaboration, the companies look to facilitate “well-structured, consistent” risk transfer submissions to the market.
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This alliance aims to address the insurance industry’s need for a better understanding of the impact of climate change, extreme weather and natural peril catastrophes on communities globally.
Moody’s RMS added that parametric insurance solutions are increasingly recognised as a viable and effective alternative to traditional catastrophe protection methods.
The joint effort is expected to benefit a diverse client base including Lloyd’s syndicates, large corporations with captives and ILS funds, all of whom are exploring the advantages that parametric reinsurance can offer.
It will focus on a variety of perils such as windstorms, wildfires, earthquakes and other severe convective storms.
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By GlobalDataMoody’s RMS noted that the use of detailed modelling, comprising industry loss, empirical and stochastic analysis, will foster greater trust in parametric policies, which can serve as an alternative to conventional insurance products.
As confidence in parametric solutions grows, they are anticipated to attract more investment as a distinct class of business, the company added.
Augment Risk Parametric global head Kurt Cripps said: “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.”
In February 2024, Moody’s RMS and digital catastrophe and parametric risk exchange company CatX collaborated to bolster the latter’s analytical capabilities.
