NU Online News Service, May 18, 1:55 p.m. EDT
Risk Management Solutions (RMS) said it has released a parametric industry loss index designed to provide insured loss estimates for Japan earthquakes.
RMS said a parametric industry loss index is designed using output from the RMS catastrophe models and is specifically used for the transfer of risk.
The index, called Paradex Japan Earthquake, will become part of RMS' existing suite of parametric industry loss indices that cover U.S. hurricane, U.S. earthquake and Europe windstorm, the catastrophe modeler said.
The index, RMS added, provides estimates by city code and line of business for all 47 prefectures–or jurisdictions–in Japan and combines ground shaking data from U.S. Geological Survey (USGS) ShakeMaps with industry exposure data to calculate insured loss estimates.
RMS said the index incorporates damage from ground shaking and related fire, "enabling issuers to customize the index to match their exposures and minimize the risk of a security failing to fully cover their event losses."
Peter Nakada, managing director of RMS RiskMarkets, said, "There is no definitive authority providing industry loss estimates for catastrophe events in Japan, so Paradex is designed to fill this gap."
He added, "Insurers and reinsurers now have a clear-cut way of transferring earthquake risk, which was previously only available through complex [catastrophe] bonds."
RMS said the index allows for quick and transparent transfer of risk to the capital markets due to Paradex's ability to calculate event index values in 40 business days or less.
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