RMS Provides Risk Analysis for Taiwan Residential Earthquake Pool Securitization

Risk Management Solutions (RMS), a provider of products and services for the management of catastrophe risk, announced that it provided the risk analysis for a securitization of insurance risk by the Taiwan Residential Earthquake Insurance Pool (TREIP).

The securities were issued by Formosa Re Ltd., a special purpose Cayman Islands company established by Central Reinsurance Corporation, administrator for the insurance pool. The three-year, $100 million indemnity transaction covers potential losses to the TREIP portfolio of residential earthquake insurance policies. The securities were offered by Swiss Re Capital Markets, Aon Capital Markets, and MMC Securities Corp.

RMS performed the risk analysis using its Taiwan Earthquake model, which simulates thousands of potential earthquake events on known earthquake sources throughout the Republic of China (Taiwan). The model generates estimates of building, contents, and time element losses to insured exposure, and is used by the insurance and reinsurance industry worldwide to support underwriting, portfolio management, and risk transfer decisions. For the TREIP analysis, RMS utilized an expanded database of high-resolution soil data provided by the Taiwan Ministry of Economic Affairs.

The residential insurance pool began offering earthquake insurance coverage in April of 2002. It was established by the Taiwanese government in response to the 1999 Chi-Chi Earthquake (magnitude 7.6) which caused over $12 billion in economic losses, approximately $1 billion of which was insured. Within the first year of its operation the insurance pool issued over 600,000 policies.