Resolute Global Partners, an investment adviser specializing in insurance and reinsurance, announced the launch of “Footprint,” a new type of reinsurance contract, which the firm created in collaboration with global reinsurance broker Gallagher Re and catastrophe modeling firm Karen Clark & Co. (KCC).
Footprint can be used for any type of catastrophic event, from severe convective storms and wildfires to hurricanes and earthquakes. The first Footprint transaction is focused on severe convective storms, which are among the most common, most damaging natural catastrophes in the U.S. These storms, which can include tornadoes, hail and high winds, have been one of the costliest perils for insurance companies.
As a result, insurance companies are demanding more coverage while reinsurers are limiting supply, a dynamic that highlights Footprint’s value in the market, the company said in a statement.
Footprint’s innovative structure solves a number of problems that have vexed the reinsurance industry and its investors since 2017, including trapped capital, extended settlement times, economic inflation, social inflation, non-modeled risks and pricing uncertainty.
The product’s benefits include rapid claim settlement (within 30 days of an event), automatic commutation (within 30 days of contract maturity) and fixed exposure risk. Unlike other products such as parametric triggers, industry loss warranties and cat bonds, this approach provides a more accurate assessment of storm losses than what is currently available, giving insurance companies cost-effective coverage and critical liquidity post-event while also offering investors a more efficient way to access the property reinsurance market and earn attractive returns.
Footprint’s process is straightforward: An insurance company submits its exposure file, which is then fixed at the inception of the contract. In the event of a covered event, KCC will overlay the intensity footprints on the insurance company’s fixed exposure profile and determine the company’s ultimate loss. The loss, as determined by the model, is paid to the insurance company within 30 days. The contract is automatically commuted within 30 days of maturity, allowing investors to receive their original investment plus any profits, or less any losses, immediately.
“We’re proud to lead the market with another innovative insurance solution. Footprint gives investors the opportunity to capitalize on the current attractive rate environment – freed from the problems the industry has been grappling with over the past several years,” commented Tom Libassi, co-founder and managing partner of Resolute Global.
“Given the much-improved structure, terms and pricing that Footprint provides to insurance companies and investors compared with other contracts, we believe this product has the potential to transform the reinsurance industry.”
This transaction, and its future applications, are enabled by KCC’s advanced catastrophe modeling technology. For severe convective storms, the KCC model ingests more than 30 gigabytes of atmospheric data from satellites, global weather models and radar each day, which are used in complex scientific algorithms to create high-resolution hail and wind intensity footprints. These footprints are then superimposed on a portfolio of properties to estimate the resulting losses.
“Severe convective storm losses dominate weather-related property claims in the U.S., and KCC has invested substantial resources to develop the most advanced and accurate models,” said Karen Clark, CEO of KCC. “We’re thrilled to be working with Resolute Global to bring to the market this innovative transaction providing substantial cover for severe convective storm losses along with a transparent, timely and highly efficient way for investors to access the market.”
Doug May, president, Gallagher Re North America, said, “We are pleased to have advised Resolute Global on this innovative reinsurance contract. In this challenging marketplace, we believe this new product will help expand the sources of capacity for our clients.”
About Resolute Global Partners
Resolute Global is an employee-owned, SEC-registered investment adviser that finds and supports niche opportunities in the insurance and reinsurance market by leveraging its strong relationships, underwriting and actuarial experts, and market knowledge. The firm partners with insurance providers to design innovative solutions and builds long-term value for its investors by creating a diversified portfolio of [re]insurance risks uncorrelated with traditional assets. Founded in 2011 as ILS Capital Management, Resolute Global has offices in Hamilton, Bermuda; London; Stamford, Conn.; Chicago, Ill.; and Jacksonville, Fla.
Source: Resolute Global Partners
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