Five listed markets in personal forward risk. Published pricing formula, published spreads, defined settlement, retail access from 500 EUR.
| Market | Reference | Settles on | Published spread |
|---|---|---|---|
| Obsolescence Notes (OBS) | A named role at a named employer | The role ceasing to be performed by a person | 40 bp |
| Residual Skill Notes (RSN) | A defined competence | The competence falling below a substitution threshold | 120 bp |
| Deployment Volatility (DVOL) | The timing of an announcement | The announcement, irrespective of content | 180 bp |
| OBS-100 Index | The hundred most automatable occupations | Quarterly, on level | 25 bp |
| Consent Instruments (CN) | Agreement not yet given, to terms not yet written | On transfer or amendment | 260 bp |
Spreads widen with the observability of the reference. An obsolescence note references one role at one employer and settles on a fact that either occurred or did not. A consent instrument references an agreement that does not yet exist, which is why it is the widest market we quote and, currently, the most active.
The premium formula is published and is the same for every participant.
Monthly premium = (cover amount / cover term in months) x (1 + loading)
Cover of 45,000 EUR over 18 months gives a base of 2,500 EUR per month. A loading of 0.8 per cent produces a monthly premium of 2,520 EUR. Over the full term the policyholder pays 45,360 EUR against cover of 45,000 EUR.
The loading is where the pricing work sits. Three inputs.
An event occurs when the reference role has not been performed by a natural person at the reference employer for 90 consecutive days. Determination is made on notice, not automatically, and the notifying party pays a determination fee of 1,200 EUR.
| Stage | Mechanic | Period |
|---|---|---|
| Notice | Any holder of an interest may file. Fee payable on filing. | Any business day |
| Observation | 90 consecutive days without performance by a natural person | 90 days |
| Determination | Committee of 11. A determination carries on 7 votes. | 15 business days |
| Dispute | Filed in writing. Heard by the same committee. | 5 business days |
| Payment | Cover paid to the holder of record | T plus 10 business days |
The determination committee has eleven seats. Eight are held by licensed deployment-data contributors, two by retail representatives, and one by an independent member appointed for a three-year term. Seven votes carry a determination. Seat allocation is published, has not changed since inception, and is reviewed on the same schedule as the index.
Successor provision. Where a reference role is retitled, restructured or absorbed into another function, the reference is deemed continuous and the note continues against the successor role. Where no successor role can be identified, the note continues against the reference employer. Notes have not been extinguished by reorganisation and cannot be.
In the last twelve months, 3,410 determination notices were filed. Institutional participants filed 3,118 of them, or 91.4 per cent, and retail participants filed 292, or 8.6 per cent. Of the determinations made, 214 were disputed and 9 were overturned, an overturn rate of 4.2 per cent.
OBS-100 aggregates exposure across the hundred most automatable occupations, equally weighted, rebalanced quarterly. A mean of 7 constituents is replaced at each rebalance, which is 28 per annum, or 28 per cent annual turnover.
The index was set at 100.0 at inception. It currently stands at 148.5, a compound 14.1 per cent per annum over three years. It has closed lower than the prior quarter on no occasion. Full constituent lists, weightings and rebalance notices are published on the same schedule.
Every market listed here is quoted two ways and both sides are open. Cover is typically bought by the retail participant and written by a professional participant holding a reference-data licence.
Continuous two-way quoting is provided by participants whose risk on the reference is quantified rather than estimated. That is what makes the book firm at size, and it is why the quoted spread on an obsolescence note is 40 basis points rather than the several hundred a purely opinion-driven book would require. The arrangement is disclosed at account opening, at point of sale and on every confirmation. Details of who may take which side, and on what terms, are set out on the participants page.