Turkish Catastrophe Insurance Pool Uses RMS Earthquake Model to Structure New Bosphorus Catastrophe Bond
Bosphorus Ltd. catastrophe bond provides $100 million of catastrophic earthquake coverage
NEWARK, Calif. -
August 26, 2015 -
RMS, the world’s leading catastrophe risk management firm, today announced that it conducted the risk analysis for a new catastrophe bond issued through Bosphorus Ltd., using the RMS® Europe Earthquake Model. The bond is sponsored by the Turkish Catastrophe Insurance Pool (TCIP), a legal entity responsible for the implementation and management of Compulsory Earthquake Insurance in Turkey. The bond closed August 17, 2015 and transfers $100 million of catastrophic earthquake risk to the capital markets.
“After the positive outcome of the Bosphorus 1 Re transaction in 2013, TCIP and RMS collaborated once again to create a new index, using ground motion observations across an expanded network of 73 strong-motion seismometers,” said Süha Çele, executive board member of Eureko Sigorta A.Ş.
Remzi Duman, reinsurance director responsible for reinsurance affairs of Eureko Sigorta A.Ş., added, “The transparent trigger mechanics were understood and accepted by investors, and strong demand made this a highly successful transaction.”
The RMS Europe Earthquake Model uses a pan-European seismic source model to assess earthquake hazard in Istanbul and includes consideration of time-dependent earthquake recurrence on the North Anatolian Fault. The RMS methodology for modeling parametric earthquake transactions includes simulation of hazard uncertainty to adequately capture the risk profile of the deal.
“The successful Bosphorus deal shows that investors are keen to take on diversifying perils when the risks are adequately understood through robust modeling,” said Ben Brookes, vice president of capital markets at RMS. “RMS’ experience with deals such as MetroCat Re and Bosphorus 1 Re helps public bodies such as TCIP transfer catastrophe risk to the capital markets through intelligently structured, insurance-linked securities.”
This deal is the second parametric earthquake bond issued by TCIP to provide protection against earthquakes in Istanbul.
RMS models and software help financial institutions and public agencies evaluate and manage catastrophe risks throughout the world, promoting resilient societies and a sustainable global economy.