AIR Technology Supports Trinom Ltd Securitization; Innovative Models Applied in Multi-Peril, Multi-Region Cat Bond.

Business/Technology Editors

BOSTON--(BUSINESS WIRE)--Aug. 3, 2001

Applied Insurance Research, Inc. (AIR) has applied two of its most innovative modeling technologies to the securitization of catastrophe risk. The Boston-based catastrophe modeling firm provided the risk analysis in support of the recently completed Trinom Ltd. transaction, which raised $161.8 million of coverage for Zurich Insurance Company's underlying insurance risk from US hurricane, US earthquake and European windstorm. In performing the analysis, AIR has delivered to Zurich and Trinom investors results based on Numerical Weather Prediction (NWP) technology for the modeling of European windstorms and

the Advanced Component Method(TM) (ACM(TM)) for earthquake damage estimation.

"Traditional parameterized models simply cannot capture the complexity of European extratropical cyclones," said Dr. John Keller, senior research scientist in meteorology at AIR. Parameterized models typically employ a limited set of variables to characterize storms systems, such as lowest central pressure and a well-defined storm track. "Extratropical cyclones are very different from their tropical counterpart, hurricanes," explained Dr. Keller; "European storms exhibit multiple areas of relatively low and high pressure, the locations of which can change quickly and frequently. Only through NWP can such complexity be modeled realistically."

Another innovation in the transaction is AIR's ACM(TM), which models buildings as complex configurations of individual structural and non-structural components, each of which responds uniquely to the natural resonance between the building and incoming seismic waves. "ACM is a rigorous, engineering-based technology," said Dr. Nozar G. Kishi, director of engineering research and analysis at AIR, "which leads to a more objective assessment of overall building damageability and contributes to a more accurate estimation of modeled earthquake losses in this transaction."

Under the three-year arrangement, which was brokered by Aon Capital Markets and Morgan Stanley, recovery is triggered by AIR's estimation of losses to a notional portfolio resulting from qualifying hurricane, windstorm and earthquake events. The A-1 Notes received a rating of Ba2 from Moody's, BB from Standard & Poor and BB- from Fitch. The A-2 Notes received a Ba1 from Moody's, BB+ from Standard & Poor and BB from Fitch.

Applied Insurance Research is the technological leader in providing catastrophe modeling services and computer software solutions (CLASIC/2(TM), CATRADER(R) and CATMAP(R)/2) to the insurance, reinsurance and capital markets. AIR's models simulate losses from natural catastrophes such as hurricanes, hail, tornadoes, other windstorms, flood and earthquakes in over 30 countries. Offices are located in Boston, London, Seattle, Hyderabad and San Francisco. The company's Web address is www.air-worldwide.com.