Sometimes you need coverage for just a few months of the year. For those in hurricane-prone areas of the country, covering the risk for the six-month hurricane season meant buying an annual policy. Not the most cost-effective solution, but the only solution available.
Until now, that is. Thanks to American International Group (AIG), known for its bold underwriting strategy, there’s a new CAT bond in town. Underwritten by Compass Re II, the Atlantic hurricane season — from June 1 to November 30 — is now covered by a $300 million, fully collateralized reinsurance product.
The 2015-1 bond the first of its kind to offer parametric triggers –events that are indexed to the natural hazard named. The bond’s parametric index trigger will be based on actual event parameters from the National Hurricane Center. The pre-determined data gathering points factor in location, storm size, and maximum sustained winds.
So far, investors have responded positively to the product.