Insurance product, rating and credit enhancement system and method for insuring project savings
View Patent ↗In the present invention, an insurance product, rating system and method generally relates to a rating and pricing system for quantifying the risk that the annual savings will not fall below specified levels associated with implementing and maintaining economic improvements. Disclosed embodiments involve a credit enhancement system and method relating to the manner in which insuring a project savings floor (i.e., a minimum level of return on investment for a given improvement project) can be realized in a better credit rating for bonds or loans associated with the improvement project. The product, system and method can be applied to various industries, including, power generation, petro-chemical, manufacturing and refining facilities. Various embodiments disclosed herein relate to a system and method for establishing a rating system to determine the impact on an insured's credit risk.
1. A computer implemented method, comprising:
receiving, by a specifically programmed computer, a plurality of loan interest rates by rating category, and default probability data for a plurality of time intervals;
receiving, by the specifically programmed computer, a loan amount, a loan term, and a payment schedule;
receiving, by the specifically programmed computer, insured floor project savings risk distribution data for an improvement plan for a facility;
for each rating category, computing, by the specifically programmed computer, net periodic loan payments for a plurality of confidence levels of project savings based on the insured floor project savings risk distribution data;
for each rating category, computing, by the specifically programmed computer, default amounts for the plurality of confidence levels of project savings, based on the net periodic loan payments for such rating category;
determining, by the specifically programmed computer, equivalent credit risk relationships based on the default amounts for the plurality of confidence levels of project savings at each rating category;
computing, by the specifically programmed computer, a project loan credit rating enhancement for the improvement plan for the facility based on the equivalent credit risk relationships;
and
analyzing, by the specifically programmed computer, a pricing of an insurance policy based on the project loan credit rating enhancement associated with implementing the improvement plan for the facility.
2. The method of claim 1 , wherein the facility is a power generation plant.
3. The method of claim 1 , wherein the facility is a chemical plant.
4. The method of claim 1 , wherein the facility is a refining plant.
5. The method of claim 1 , wherein the facility is a manufacturing plant.
6. A computerized system, comprising:
at least one programmed computer, having a non-transient computer tangible readable medium having stored thereon software instructions executable by at least one processor of the computer, wherein the software instructions comprise:
code to receive at least the following:
i) a plurality of loan interest rates by rating category,
ii) default probability data for a plurality of time intervals,
iii) a loan amount,
iv) a loan term,
v) a payment schedule, and
vi) insured floor project savings risk distribution data for an improvement plan for a facility;
code to, for each rating category, compute net periodic loan payments for a plurality of confidence levels of project savings based on the insured floor project savings risk distribution data;
code to, for each rating category, compute default amounts for the plurality of confidence levels of project savings, based on the net periodic loan payments for such rating category;
code to determine equivalent credit risk relationships based on the default amounts for the plurality of confidence levels of project savings at each rating category;
code to compute a project loan credit rating enhancement for the improvement plan for the facility based on the equivalent credit risk relationships;
and code to analyze a pricing of an insurance policy based on the project loan credit rating enhancement associated with implementing the improvement plan for the facility.
7. The system of claim 6 , wherein the facility is a power generation plant.
8. The system of claim 6 , wherein the facility is a chemical plant.
9. The system of claim 6 , wherein the facility is a refining plant.
10. The system of claim 6 , wherein the facility is a manufacturing plant.
11. The method of claim 1 , wherein the method further comprises:
computing, by a specifically programmed computer, project improvement distribution data for the improvement plan for the facility;
computing, by the specifically programmed computer, an insured floor of savings for the improvement plan for the facility; and
computing, by the specifically programmed computer, the insured floor project savings risk distribution data for the improvement plan for the facility based on:
i) the insured floor of savings for the improvement plan for the facility and
ii) the project improvement distribution data for the improvement plan for the facility.
12. The system of claim 6 , wherein the software instructions further comprise:
code to compute project improvement distribution data for the improvement plan for the facility;
code to compute an insured floor of savings for the improvement plan for the facility; and
code to compute the insured floor project savings risk distribution data for the improvement plan for the facility based on:
i) the insured floor of savings for the improvement plan for the facility and
ii) the project improvement distribution data for the improvement plan for the facility.