What’s New: In Brief (May 22, 2007)

Risk Management Solutions (RMS) has designed a trigger mechanism and performed the risk analysis for a Swiss Re securitization of typhoon risk in Japan. A Cayman Islands special purpose vehicle, Akibare Ltd. has provided collateralized coverage of $120 million over five years for Mitsui Sumitomo Insurance Co. Ltd. We believe that this transaction illustrates how parametric deals can benefit both sponsors and investors, Peter Nakada, managing director of RMS Consulting, said in a press release. Because the deal is based strictly on wind speeds, it is transparent and simple for investors to understand, while a dropdown feature provides Mitsui Sumitomo with the dynamics they wanted. RMS will be looking to standardize parametric indices like this, to further increase efficiency and liquidity in the market, he added. The parametric securitization uses 10-minute mean wind speeds, which are observed over 900 stations and calculate peak gust wind speeds.

A well-aimed hurricane in the Gulf of Mexico could couple staggering insured catastrophe losses with severe economic disruptions as the storm tears through the dense, onshore and offshore infrastructure of the region’s all-important petroleum industry, according to a new A.M. Best Co. special report in BestWeek U.S./Canada. Hurricanes Katrina and Rita gave a taste of the possibilities in 2005. Now, forecasts for the upcoming season suggest the quiet passage of 2006 may have been a greater aberration than was the mayhem of 2005, given current, long-term atmospheric trends.