Index offers faster loss estimates, modeller claims

Catastrophe modeller Risk Management Solutions (RMS) has added a parametric loss index for Japanese typhoons to its existing list of four industry loss indices.

The index, Paradex Japan Typhoon, combines wind speed data from a network of stations operated by the Japan Meteorological Agency (JMA) with industry exposure data to calculate insured loss estimates.

The index can be used to structure and monitor catastrophe bonds, industry loss warranties and derivative contracts.

The index provides loss estimates by city/ward and line of business for all 47 prefectures in Japan. RMS claims this enables issuers to tailor the index to match their exposures and minimize the risk of a security failing to fully cover their event losses.

“Paradex Japan Typhoon is significantly faster than any other authority in providing loss estimates, whilst offering a robust track record when tested against historical events,” said Peter Nakada, managing director of RMS Risk Markets.

“By building indices for the five major peril regions, we’ve opened the door to perform swaps where both sides can be based on Paradex, and laid the foundations to structure efficient transactions covering multiple perils and regions,” added Nakada.

RMS's suite of indices now includes US hurricanes and earthquakes, Europe windstorm, Japan typhoon and earthquake.