Munich Re facilitates first parametric derivative cover in Israel

2014/03/05

Munich Re has structured the first natural catastrophe derivative deal in Israel.

Munich. The innovative cover, in which Munich Re is also the risk carrier, is based on a parametric trigger of the easy-to- calculate “cat in a box” type and provides our client I.D.I. Insurance Company with coverage for losses from earthquakes in the amount of ILS 50m (US$ 14m). Munich Re used its extensive know-how of nat cat risks and earthquake exposures for devising and designing the cover.

“We are pleased to have been able to support our client with this non-conventional product in the Israeli market and thus help meet I.D.I.’s demand for suitable earthquake cover beyond and in addition to conventional reinsurance solutions”, said Ludger Arnoldussen, member of Munich Re’s Board of Management responsible for Germany, Asia/Pacific and Africa.

The transaction was written by Munich Re’s Risk Trading Unit and facilitated by a cooperation with Aon Benfield Securities. Munich Re is prepared to devise similar and additional solutions for Israeli insurance companies to meet their demand for effective earthquake protection in Israel.

The derivative-based risk transfer is a good supplement to I.D.I.’s traditional reinsurance programme, allowing for a quick payout immediately after a severe earthquake event. Munich Re has also used this format for other perils in other markets to support clients' needs.

Munich Re sees parametric cover concepts as a valuable risk transfer tool and a useful complement to traditional insurance and reinsurance covers. “These parametric trigger-based solutions are valuable for clients in segments where quick payouts after a catastrophic event are essential. Munich Re can leverage its deep nat cat know-how to develop such tailor-made solutions to support its clients”, said Thomas Blunck, member of Munich Re’s Board of Management responsible for Special and Financial Risks.

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