First Israeli “cat in a box” deal completed

First Israeli “cat in a box” deal completed

Israel Direct Insurance is the sponsor of a ‘Cat in the Box’ transaction providing $14m of earthquake cover on an annual basis.

The transaction was facilitated by Aon Benfield Securities and was structured by Munich Re, who is also the risk carrier, and is based on a parametric trigger.

“We are very happy with the solvency-related value of the coverage secured via this parametric transaction, which provides protection not only for standard insurance risks but also for the wider financial and operational risks to an insurance company involved in an earthquake event,” said Steven Kostyn, vice-president of risk and reinsurance at Israel Direct Insurance.

The derivative-based risk transfer allows for a quick payout immediately after a severe earthquake event, according to Munich Re, who has also used this format for other perils in other markets to support clients' needs.

Paul Schultz, Aon Benfield Securities’ chief executive, said: “We believe this creates new opportunities for clients in the Israeli market and we greatly appreciate the collaboration with Israel Direct Insurance and with Munich Re in bringing this first deal to a successful conclusion."

Aon Benfield’s Impact Forecasting team supported the transaction through the provision of catastrophe modelling solutions and expertise in catastrophe management.

Goran Trendafiloski, an Impact Forecasting catastrophe model developer, said: “The transparency of the model’s technical details helped facilitate Israel Direct Insurance’s decision to purchase this parametric cover.”

Munich Re said is willing to devise similar and additional solutions for Israeli insurance companies to meet their demand for effective earthquake protection in Israel.

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