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CelsiusPro acquires Global Parametrics

InsTech’s Henry Gale spoke to Mark Rueegg, Founder and CEO of CelsiusPro, about what this deal means for the company, the parametric risk transfer market and disaster risk financing.

In conversation with: CelsiusPro

Since its foundation in 2008, CelsiusPro has specialised in parametric insurance solutions to help clients worldwide mitigate the effects of extreme weather and natural catastrophes. The company provides products, technology, and consulting services. In September 2023 it announced the acquisition of UK-based Global Parametrics. InsTech’s Henry Gale spoke to Mark Rueegg, Founder and CEO of CelsiusPro, about what this deal means for the company, the parametric risk transfer market and disaster risk financing.

Why has CelsiusPro decided to acquire Global Parametrics?

I founded CelsiusPro in 2008 to enable businesses to efficiently enter the parametric insurance market and gain financial protection against climate and NatCat risks. In 2021 we launched an MGA subsidiary, NatCatPro, which underwrites parametric natural catastrophe insurance. The combined CelsiusPro and Global Parametrics group opens new possibilities for businesses, governments, NGOs, and communities to build resilience against perils such as hurricanes, floods, earthquakes, and drought.

We have found that in many ways Global Parametrics’ capabilities are complementary to CelsiusPro. Whilst CelsiusPro operates mostly in parts of the world with developed insurance markets, Global Parametrics focuses more on emerging markets. CelsiusPro is also more technology-driven, whilst Global Parametrics brings an asset management approach. Global Parametrics manages the Natural Disaster Fund (NDF), a public-private partnership backed by German and UK government agencies, which provides risk capacity for parametric solutions in low- and middle-income countries particularly vulnerable to climate and natural catastrophe risks.

What is the future of the Natural Disaster Fund?

The Natural Disaster Fund’s backing from the German and UK governments is a long-term commitment that continues with this acquisition. We are also in discussion with other governments to increase the Natural Disaster Fund’s capacity. As well as the capacity committed by government agencies, reinsurer Hannover Re shares risks with the Natural Disaster Fund as part of a long-standing relationship with Global Parametrics.

What does this acquisition mean for Global Parametrics’ existing partners and clients?

Clients and partners of Global Parametrics will benefit from working with a counterparty with enhanced expertise. With the acquisition by CelsiusPro, there will be more resources available to the Global Parametrics team for technology, research and development, and modelling. This will enable Global Parametrics to be faster in providing quotes, for example.

What does this acquisition bring to CelsiusPro’s existing partners and clients?

CelsiusPro can draw on the expertise of the Global Parametrics team. With the addition of the Natural Disaster Fund managed by Global Parametrics, CelsiusPro has additional risk capacity available for certain projects. Global Parametrics also manages the Technical Assistance Facility, which provides counterparts with funding for research and development to create new parametric products. With the Technical Assistance Facility, CelsiusPro can now help fund selected product development projects with our partners.

How does it change the products and services that CelsiusPro offers?

CelsiusPro continues to support parametric products for perils such as tropical cyclones, earthquakes, droughts, excess rainfall, and floods. This acquisition expands CelsiusPro’s offering across the value chain so that we can address more of our clients’ needs.

For example, if an insurance company wants to provide parametric insurance, CelsiusPro can assist through its ‘White Label Platform’ technology. Moreover, if the insurer needs additional risk capacity, CelsiusPro is now in a better position to help them. In some cases, we may co-subsidise the set-up cost for the product with the Technical Assistance Facility.

What does the new combined structure of CelsiusPro look like?

CelsiusPro now has 35 employees with offices in Zurich, Sydney, and London. Most of our employees sit in Zurich and London. We will preserve three brands, CelsiusPro for climate risk and parametric insurance technology and consulting, NatCatPro for parametric natural catastrophe underwriting, and Global Parametrics for disaster risk financing and managing the Natural Disaster Fund.

What are CelsiusPro’s key objectives in the next twelve months?

After an acquisition, it is important to bring together and capitalise on the abilities of both teams. In the short term, we are making every effort to make everyone feel comfortable in the bigger team and grow colleagues’ understanding of the combined value proposition the new CelsiusPro Group offers so that we can deliver effectively for our clients.

Throughout, client communication is key. CelsiusPro will be focused on listening to its newly combined group of clients, understanding what they need, continuing to deliver products and services to them and growing the market for parametric risk transfer further.

In what areas of parametric insurance do you see the most opportunity for CelsiusPro?

I believe that parametric hurricane and earthquake coverage is far from having reached saturation levels. There is still a strategic opportunity for growth in those perils. There are also more complex perils where we see opportunities for parametric transactions, with wildfire and tornado at the top of our list for research and development.

Currently our key products include excess and lack of rainfall, heat, frost, tropical cyclone and earthquake. Though we have done many transactions for other perils as well, our focus is on helping clients to better understand the benefits of those key products. There are still many people across the insurance industry value chain that are not sufficiently acquainted with parametric insurance. Hence, our mission is to elevate parametrics from fringe to centre stage in climate risk protection.

How do you plan to work with governments for disaster risk financing in the future?

The UK and German governments were the initial investors in Global Parametrics’ National Diaster Fund. The relationships with these governments remain important to us and we are aligned with the vision they set out for Global Parametrics. We will continue to work with these and other governments to provide risk capacity for vulnerable communities across the globe. I believe it is important that governments are willing to take these risks alongside private reinsurers. This will provide much-needed security in the turbulent and volatile climate the world will face in the years ahead.

Could parametric risk transfer have a role to play in resolving international discussions around ‘loss and damage’?

We see a significant role for parametrics in resolving ‘loss and damage.’ One prime example is the ‘Global Shield against Climate Risks’ that was introduced by the German government at COP27 [you can read more about the Global Shield here]. The Global Shield initially involves identifying climate risks for vulnerable countries and quantifying them, but ultimately it will provide a risk transfer solution that is likely to be parametric. Parametric will be pivotal in delivering climate risk transfer to vulnerable countries. The Natural Disaster Fund, which Global Parametrics will continue to manage, is already backed by the German and UK governments and thus is well placed to contribute to transferring these risks from the Global South to the Global North.

What sort of companies would you like to connect with?

We would like to connect with insurers who are exploring the idea of a parametric product line, brokers who are looking for structuring support or quotes and corporations and government agencies that are looking to understand how climate risk impacts them and learn about parametric risk transfer solutions.

You can contact CelsiusPro by emailing [email protected].