Moody's RMS is collaborating with reinsurance brokerage firm Augment Risk to develop the market for parametric risk transfer.
The partnership is looking to serve clients including large corporates with captives, as well as Lloyd’s syndicates and ILS funds, focusing on a cross-section of perils including windstorms, earthquakes, wildfires and severe convective storms.
The Moody’s RMS and Augment Risk collaboration will enable placements to be syndicated among various capital sources.
Moody’s RMS said using more detailed modelling – inclusive of industry loss and empirical and stochastic analysis – should help build greater trust toward developing parametric policies as an alternative to traditional products.
As confidence grows, it said, parametric solutions as a class of business should, in turn, attract greater investment.
Ben Brookes, Moody’s RMS managing director, said the company believes parametric risk-transfer products will play an increasingly important role in managing risk.
"Parametric risk transfer offers the combined benefits of high transparency and complete risk disclosure, plus the prospect of rapid loss settlement,” he said.
Andrew Matson, CEO at Augment Risk, added: "For us, this collaboration is an important development as investors seek more accurate and specific modelled outputs."
Augment's global head of parametric Kurt Cripps said that better information on how the product responds to certain perils was also key to achieving solvency benefits for carriers.
"For too long, the parametric market has been on the periphery of the natural catastrophe market. We believe that now is the time for parametric solutions to truly challenge traditional reinsurance buying habits," he added.