AIR Worldwide Corp. in Boston announced today that hedge fund manager Fermat Capital Management, LLC, has licensed its risk models to use in managing its catastrophe bond portfolio.

Fermat, a Westport, Conn., investment management company specializing in insurance-linked securities, will be using AIR's catastrophe risk model CATRADER and its ALERT online real-time loss estimation service, the modeling firm said.

Pricing is loosely based on proposed use of product, AIR said, but would give no other information concerning financial terms.

“The AIR catastrophe models that underlie the software enable us to generate loss estimates for a wide range of our potential investments,” said a Fermat spokesman, Nelson Seo. “Results from these simulations will help us better manage our overall portfolio risk and to assess the likely return on specific catastrophe-related instruments.”

The AIR system “allows hedge funds and other investors in catastrophe bonds to determine potential loss distributions and quantify the correlation between bonds,” explained Will Skinner, AIR head of business development for the financial markets.

AIR's announcement said the use of ALERT and CATRADER will help Fermat determine their portfolio risk in real time from actual events unfolding.

AIR, a business of the Insurance Services Office in Jersey City, N.J., models natural catastrophes in more than 40 countries and the risk from terrorism in the United States.

Special Reports /

Hedge Fund To Use AIR Model For CAT Bond Risk

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