RMS Performs Risk Analysis for First Securitization Covering Electrical Transmission and Distribution Risk

€190 Million Deal Covers European Windstorm Losses

Newark, Calif. – Jan 12, 2004 – Risk Management Solutions (RMS), the world's leading provider of products and services for the management of catastrophe risk, performed the risk analysis for the Pylon Ltd securitization covering damage from windstorm for a major European electricity supplier. The innovative securitization is the first for a European corporate and the first such deal worldwide to cover transmission and distribution (T&D) risk.

Utility companies across the globe have exposure to windstorm catastrophe loss through damage to T&D networks and property. In December 1999, damages from Windstorms Lothar and Martin in France caused substantial damage to the electricity supply network, affecting more than three million customers in France. Similarly the storm in October 1987 caused substantial damage to the T&D networks in the U.K. and France.

RMS created a parametric index for the Pylon Ltd transaction. The index is based on recorded windspeeds, and is weighted to match the regional variations in vulnerability to wind-related damage for the protected network. A multi-year risk analysis to quantify the probability of loss was performed using the proprietary stochastic database in the RMS™ Europe Windstorm Model.

"Pylon Ltd represents an important new milestone in the development of the alternative risk transfer market," said Dr. Robert Muir-Wood, chief risk officer at RMS. "Index-based catastrophe risk securitization is now offering a truly competitive risk transfer solution for lines of business that have had difficulty in obtaining conventional insurance coverages. Windstorm-related power outages are a major concern to utility companies in many regions, as highlighted by the six million U.S. customers without power following Hurricane Isabel in September 2003."

CDC IXIS Capital Markets were the arrangers for the transaction, and the placement was co-managed with Swiss Re Capital Markets. The deal has two tranches over five years, for a total of €190 million ($216 million) in coverage. The first €120 million ($136 million) tranche is rated Ba1 by Moody’s Investor Service and BB+ by Standard & Poor’s (S&P), and the second €70 million tranche is rated A2 by Moody’s and BBB+ by S&P.

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