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US 8,805,704 B2Granted
Index and risk-linked reinsurance product
AssigneeHartford Fire Insurance Company
InventorsChristopher M. Lewis, Richard L. Alleyne
Life of this patent
Estimating the term…
Abstract
Disclosed is a novel insurance product that provides additional reinsurance coverage to mitigate risks associated with catastrophic events which adversely affect property and casualty insurance rates. The reinsurance product contains one or more tiers of protection which allows a purchaser to vary the coverage related to one or more catastrophic events, such as an earthquake, a hurricane, or a flood.
Claims25
A system for securitizing insurance risk, comprising:
- one or more insurance data storage devices storing data including individual geographic region data and line-of-business industry loss data;
- one or more computer processors;
- an insurance memory in communication with the one or more computer processors and storing insurance program instructions, the one or more computer processors operative with the insurance program instructions to:
- establish for a security product, terms including one or more risk classes, each risk class representing one or more risks, and a coverage period for the security product;
- relate the terms of the security product to the individual geographic region data and line-of-business industry loss data using a numerical index EIV (Event Index Value), wherein EIV is equal to a product of an automobile load factor and the following expression for at least two lines of business:
- (
- ∑
- s
-
- ∏
- s
-
-
- I
- S
- P
-
- ∑
- s
-
-
- X
- s
-
- I
- S
- C
- )
- where:
- I is a loss index by individual geographic region;
- s indicates the individual geographic region;
- p indicates that the line of business is personal lines;
- c indicates that the line of business is commercial lines;
- Π and χ are payout factors for an insurance provider for each individual geographic region and line of business for a given risk class and series of the security product;
- wherein said numerical index includes the payout factors for selected combinations of individual geographic region and line of business for the at least one of said one or more risk classes, wherein said payout factors are adjustable during the coverage period of the security product and are determined based on the individual geographic region data and the line of business industry loss data for an event occurring during the coverage period of the security product, and wherein said payout factors are for use with at least a reported industry loss for determining payout amounts for a covered event;
- and
- compute losses associated with said at least one or more risk classes, and determine a return on said security product, based on the numerical index and the payout factors.
34 more elements
A computer implemented method of securitizing insurance risk, comprising:
- accessing, by the one or more computer processors, from one or more insurance data storage devices, data including individual geographic region data and line of business industry loss data;
- establishing for a security product, by one or more computer processors, terms including one or more risk classes, each risk class representing one or more risks and a coverage period for the security product;
- generating, by the one or more computer processors, a relationship between the terms of the security product and the individual geographic region data and line-of-business industry losses using a numerical index EIV (Event Index Value), wherein EIV is equal to a product of an automobile load factor and the following expression for at least two lines of business:
- (
- ∑
- s
-
-
- ∏
- s
-
-
- I
- S
- P
-
- ∑
- s
-
-
- X
- s
-
- I
- S
- C
- )
- where:
- I is a loss index by individual geographic region;
- s indicates the individual geographic region;
- p indicates that the line of business is personal lines;
- c indicates that the line of business is commercial lines;
- Π and Ω are payout factors for an insurance provider for each geographic region and line of business for a given risk class and series of the security product,
- wherein the numerical index includes the payout factors for selected combinations of individual geographic region and line of business for the at least one of said one or more risk classes, wherein said payout factors are adjustable during the coverage period of the security product and are determined based on the individual geographic region data and the line of business industry loss data for an event occurring during the coverage period of the security product, and wherein said payout factors are for use with at least a reported industry loss for determining payout amounts for a covered event;
- and
- computing, by the one or more computer processors, losses and a return on said security product, based on said numerical index and the payout factors.
33 more elements
A system for securitizing insurance risk, comprising:
- one or more insurance data storage devices storing data including individual geographic region and line-of-business industry loss data;
- one or more computer processors in communication with the one or more insurance data storage devices;
- an insurance memory in communication with the one or more computer processors and storing program instructions, which program instructions, when executed by the one or more computer processors, cause the one or more computer processors to:
- establish for a security product terms including one or more risk classes, each risk class representing one or more risks, and a coverage period for the security product;
- relate the terms of said security product to individual geographic region and line-of-business industry loss data to quantify risk using a numerical index EIV (Event Index Value), wherein EIV is equal to a product of an automobile load factor and the following expression for at least two lines of business:
- (
- ∑
- s
-
-
- ∏
- s
-
-
- I
- S
- P
-
- ∑
- s
-
-
- X
- s
-
- I
- S
- C
- )
- where:
- I is a loss index by geographic region;
- s indicates the individual geographic region;
- p indicates that the line of business is personal lines;
- c indicates that the line of business is commercial lines;
- Π and χ are payout factors for an insurance provider for each geographic region and line of business for a given risk class and series of the security product, wherein said numerical index includes the payout factors for selected combinations of individual geographic region and line-of-business, wherein said payout factors are adjustable during the coverage period of the security product and are determined based on the individual geographic region data and the line of business industry loss data for an event occurring during the coverage period of the security product, and wherein said payout factors are for use with at least a reported industry loss for determining payout amounts for a covered event;
- and
- modify said numerical index to take into account a specific class of risk at a sub-geographic level through the utilization of the payout factors of the numerical index;
- wherein said one or more risk classes include a plurality of risk classes each representing a combination of natural catastrophe risks selected from a group consisting of:
- hurricane, earthquake, hurricane and earthquake, wind and thunderstorm, tornado, hailstorm, tornado and hailstorm, and tornado and hailstorm as part of winter storm losses, individually or in combination with other perils.
36 more elements
Dependencies are inferred from the claim text.