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EQECAT Supports Swiss Re Capital Markets Issue with "Second Generation" Parametric Loss Trigger

May 29, 2001

EQECAT, Inc. announced that it provided the risk analysis in support of the recent Swiss Re-sponsored SR Wind Ltd. issue, consisting of $120 million of four-year securities, which provide protection against one or more U.S. hurricanes and one or more French windstorms. The U.S. hurricane risk included the securitization of Puerto Rico risks, marking the first time that this region has been explicitly included in an insurance-linked transaction.

The risk modeling also employed the use of "second generation parametric loss triggers," which characterize the event severity, defined as wind speed, over a series of discrete points located within the region of interest. Dr. Mahmoud Khater of EQECAT said, "the use of second generation triggers greatly minimizes the basis risk associated with the original parametric triggers that relied on wind gates, circles or boxes." He noted that "these new triggers are especially appropriate for use by reinsurers who typically have insufficient insurance data to issue an indemnity based security, and yet still provide the transparency desired by rating agencies and investors." EQECAT has pioneered the use of parametric loss triggers, providing the earthquake parametric risk analysis for the very first parametric transaction, Parametric Re, as well as the first non-insurer issuer, Oriental Land (Tokyo Disneyland) which also used a parametric loss trigger.

Swiss Re Capital Markets Corporation acted as lead manager and Lehman Brothers Inc. as co-manager in the privately placed securities. Standard & Poor's and Fitch rated both the A-1 notes (primarily French windstorm) and the A-2 notes (primarily US hurricane) floating rate tranches BB+.

EQECAT, a subsidiary of EQE International, is a member of the ABS Consulting Group. With offices in France, United Kingdom, and United States, EQECAT provides catastrophe management consulting and modeling to the insurance and financial communities from locations in Asia, Europe, the United Kingdom and the United States. EQECAT is a past winner of The Review magazine's "Professional Service Provider of the Year" award.