ILS Capital Management has adopted the catastrophe risk modeling firm AIR’s CATRADER catastrophe modeling solutions to enhance portfolio management of insurance-linked securities (ILS) and reinsurance contracts.

AIR’s CATRADER software enables potential investors to analyse catastrophe bonds and other instruments including industry loss warranties (ILW) and to accurately assess the risk before deciding to invest.

ILS Capital Management president and COO Tim Tetlow said that the company has selected AIR as the main model for its risk management architecture because it is well suited for modeling a diverse portfolio of ILS and traditional reinsurance contracts.

"It’s event-driven approach is critical in allowing portfolio correlation and seasonal aspects of underlying region-perils to be properly handled, important factors in managing accumulations and providing investors accurate net asset values," Tetlow said.

"ILS Capital incorporates this framework in its proprietary ReSolution(C) system, which integrates and manages catastrophe risk in real time across multiple catastrophe models."

CATRADER also comprises a complete database of existing active property insurance-linked securities, to facilitate users to identify trading opportunities.

"AIR delivers scientifically advanced models using a robust oversight process that ensures its models reflect basic principles of the underlying hazard to yield reasonable results," added Tetlow.