DERIVATIVES PRODUCT WILL PROVIDE EARTHQUAKE PROTECTION

Sompo Japan has linked with the Japanese Ministry of Economy, Trade & Industry, Resona Bank and Nomura Securities to offer small to medium-sized enterprises a new type of loan that will be linked to derivatives that offer a lump-sum payment in the case of an earthquake. The product will behave like a small commercial insurance product, but with a parametric trigger; a fixed sum is paid if certain externally measured conditions are met, whether or not the borrower suffers any actual loss. Resona Holdings said that it would be offering the loan in the Osaka prefecture later this year. Companies located within a certain distance of the epicentre of a Richter 7 or greater magnitude earthquake would have immediate access to the equivalent of half the balance of their loan.