Augment and Moody’s RMS collaborate to grow parametric risk asset class

Risk modelling company Moody’s RMS has partnered with reinsurance brokerage firm Augment Risk to help serve clients looking to benefit from parametric reinsurance solutions, including large corporates with captives, Lloyd’s syndicates, and insurance-linked securities (ILS) funds.

RMS explained that this newly announced development will focus on a cross-section of perils including windstorms, earthquakes, wildfires, and severe convective storms.

According to the firm, the collaboration will also “help deliver consistent risk transfer submissions to the market by enabling placements to be syndicated among various capital sources”.

Augment Risk has made clear its views on parametric reinsurance solutions, previously describing the non-traditional product as a “beacon” in a challenging market environment, “providing a valuable addition to the buyer’s alternative toolkit, alongside catastrophe bonds, industry-loss warranties (ILW’s) and retrocession”.

Ben Brookes, Managing Director, Moody’s RMS, commented on the collaboration, “We believe parametric risk transfer products will play an increasingly important role in managing risk.

“Parametric risk transfer offers the combined benefits of high transparency and complete risk disclosure, plus the prospect of rapid loss settlement. We look forward to continuing to open up significant market growth by increasing the use of sophisticated risk models and basis risk analytics as enablers.”

Kurt Cripps, Global Head of Parametric at Augment Risk, a division which was launched in October of 2023, added, “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.”

Cripps continued, “Risk is more extensive and complex than ever before, and this collaboration will allow our partners to make more informed, accurate, efficient, and confident risk management decisions, armed with the latest models that the markets use to assist in pricing parametric risk.

“By keeping clients fully informed, we can achieve more consistent prices and help normalize this exciting market. For too long, the parametric market has been on the periphery of the natural catastrophe market. We believe that now is the time for parametric solutions to truly challenge traditional reinsurance buying habits.”

Andrew Matson, CEO of Augment Risk, said, “We are committed to providing bespoke solutions that not only protect our clients but, more importantly, allow them to grow and maximize their enterprise value.

“For us, this collaboration is an important development as investors seek more accurate and specific modelled outputs.

“As one of only a few specialist brokers in this space, Augment Risk is delighted to have parametric solutions as a cornerstone of our execution strategy and this collaboration is further recognition of our absolute determination to build a differentiated and relevant reinsurance broker.”