EQECAT Provides Risk Analysis Support for the Caribbean Catastrophe Risk Insurance Facility
June 11, 2007
Oakland, California
EQECAT, Inc., a subsidiary of ABSG Consulting Inc., announced today that it provided the hurricane and earthquake risk assessment, and the design of the parametric insurance contracts which supported the formation and operation of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) that became operational on June 1.
This Caribbean-owned, regional institution is the first regional disaster insurance facility in the world. Its reserves come from participating countries and donors. Funds from Canada, the United Kingdom and the World Bank -- through the International Bank for Reconstruction and Development -- have already been received, and contributions from Bermuda, France and the Caribbean Development Bank have been pledged.
Rick Clinton, EQECAT's president, said "EQECAT was pleased to have assisted the World Bank and the participating Caribbean countries by providing the fundamental risk analysis and contract design necessary to launch this facility."
Mr. Clinton said EQECAT's work focused on a wide range of services, including:
- the collection of exposure information to define the financial loss potential in each country;
- the development of risk models for hurricane and earthquake exposure in the region;
- quantification of the potential monetary damage to the countries for various return periods using the risk models;
- an estimate of the potential government deficits arising from damage to government assets, plus the probable decrease in government tax revenues -- effectively coverage for "government business interruption" -- arising from damage to commercial businesses;
- the design of parametric insurance contracts which would promptly pay out policy proceeds based on the estimated wind speeds or ground shaking occurring during a catastrophe event; and,
- the furnishing of a probabilistic catastrophic risk model to the facility manager to enable the manager to price each parametric contract, as well as estimate the aggregate risk to the facility in conjunction with a dynamic financial model operated by the manager.
CCRIF participating governments are: Anguilla, Antigua and Barbuda, the Bahamas, Barbados, Belize, Bermuda, the Cayman Islands, Dominica, Grenada, Haiti, Jamaica, St.Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago, Turks and Caicos Islands.
Mr. Clinton said "that the design of the parametric insurance contracts was based upon EQECAT's extensive experience in developing parametric loss triggers for the catastrophe bond markets. Parametric contracts enable each country to transfer government deficit cash flow risk that otherwise would be difficult to place in traditional insurance markets, and receive prompt payments not subject to protracted claims settlement practices.
Mr. Clinton said "EQECAT believes that application of probabilistic risk models and parametric insurance contracts will prove to be an essential tool in assisting developing countries to manage their natural catastrophe risk."
EQECAT, Inc. provides state-of-the-art products and services to the global property and casualty insurance, reinsurance and financial markets. EQECAT is the technical leader and innovator of catastrophe risk management models that quantify exposure to a range of natural and man-made catastrophic risks.
Through its modeling software platform, WORLDCATenterprise, EQECAT enables clients to quantify and manage the potential financial impact of natural hazards. WORLDCATenterprise includes 181 natural hazard software models for 95 countries spanning six continents. These models are based upon innovative applications of the latest science, engineering expertise, claims and exposure data and advanced mathematics.
EQECAT, a subsidiary of ABSG Consulting Inc., was founded in 1994 and is headquartered in Oakland, California.
For more information, contact:
pr@eqecat.com