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Thought for the day… consolidation in the parametric insurance market
In this week’s Parametric Post, CelsiusPro announces that it has acquired Global Parametrics.
Since 2013, more than 50 companies have been founded that are primarily focused on parametric insurance. As the parametric market grew, founders decided to set up MGAs, data providers or analytics companies to benefit from the market’s continued growth. Many of these specialise in natural catastrophe and weather risk. In the last couple of years, the growth of the parametric natural catastrophe and weather insurance market has accelerated and leaders have begun to emerge. Consolidation is to be expected.
Most previous mergers and acquisitions in parametric insurance have involved small parametric start-ups joining companies that wanted to enter the parametric market for the first time. Meteo Protect and Jumpstart became the parametric divisions of MGAs Cooper Gay and Neptune Flood respectively. For parametric travel start-ups Blink Parametric and Setoo, Blink Parametric joined CPP Group, an assistance company working with travel insurers, while Setoo merged into Pattern, a travel insurance MGA.
With CelsiusPro acquiring Global Parametrics, like Arbol’s acquisition of eWeatherRisk in 2020, we see one parametric specialist acquiring another. The parametric market has now achieved sufficient scale for some companies to reinforce their position in the market through acquisition. There are other budding acquirers and potential acquisition targets we know in the parametric market and we expect to see more of this consolidation in the years ahead.
In the news…
CelsiusPro acquires Global Parametrics
Climate
CelsiusPro has acquired Global Parametrics to combine the two firms’ capabilities in parametric risk transfer for weather risks and natural catastrophes. As part of the CelsiusPro Group, Global Parametrics will continue to manage the Natural Disaster Fund, a public-private partnership through which the UK and German governments and Hannover Re provide risk capacity to parametric programmes that build resilience in vulnerable communities. Look out for our upcoming interview with CelsiusPro’s CEO Mark Rueegg for more details on what’s next for the company.
First parametric earthquake reinsurance deal to use sensors
Mexico • Earthquake • Sensors
Liberty Mutual Reinsurance (LM Re), MGA XS Global and technology company Safehub have announced a parametric earthquake reinsurance contract that uses sensors to trigger pay-outs. Safehub’s smartphone-sized sensors, placed in individual properties, measure ground shaking at an exact location and report in near-real time. Using sensor data as a trigger contrasts with the conventional approach to parametric earthquake coverage, which pays out based on the distance between the insured location and the earthquake’s epicentre or a regional estimate of earthquake intensity.
Cerchia platform used for hurricane ILW transaction
US • Hurricane • Blockchain
Cerchia, which is building a digital marketplace for parametric risk transfer, has announced the first transaction on its blockchain-based platform. Two privately-held companies transacted a parametric derivative, where pay-outs are triggered if the insurance industry loss from a Florida named storm exceeds $100 billion USD. The collateral for the transaction is held in auditable digital escrow accounts and pay-outs are triggered automatically based on Verisk PCS industry loss data.
Beazley, Costero and Sola launch homeowner tornado cover
US • Tornado
MGA Sola has launched a parametric tornado insurance product for homeowners in the US, with fronting capacity from insurer Spinnaker and reinsurance capacity from Beazley. Costero Brokers was responsible for securing the capacity. The product provides coverage limits of up to $15,000 USD and is available in 15 US states initially. Data from the US National Weather Service is being used to trigger pay-outs.
100,000 travellers purchase travel rain cover powered by Arbol
Singapore • Travel • Rain
According to a case study from climate risk solutions company Arbol, its partnership with insurer Singlife in Singapore has seen more than 100,000 people covered by parametric travel rain insurance as of 31 March 2023. Parametric rain insurance, powered by Arbol’s platform, is included in the most expensive of Singlife’s three travel insurance packages.
Understanding volcanic risk in the Asia-Pacific region
APAC • Volcano
Modelling firm Mitiga Solutions writes about volcanic risk in the Asia-Pacific in its latest blog post. The region has around 400 active volcanoes, half of which have erupted in the last 200 years. Many heavily populated areas lie close to volcanoes and dangerous ashfall could have a widespread impact. Mitiga is developing parametric risk transfer solutions for volcanic hazards and was involved in the first catastrophe bond to cover volcanic risks.
Swiss Re: Typhoon Saola may trigger parametric scheme
China • Typhoon
Gianfranco Lot, Chief Underwriting Officer, P&C Reinsurance, Swiss Re, has said it is likely that a parametric scheme in Guangdong, China, will be triggered by Typhoon Saola, which made landfall there on 2 September 2023. The province of Guangdong is covered by parametric insurance for typhoons, floods and extreme rainfall. Insurers PICC, Ping An and CPIC are backing the scheme with reinsurance capacity from Swiss Re.
Aon: how parametric can complement property insurance
US • Tornado • Hurricane
Broker Aon has published two case studies of parametric solutions it designed for its clients to fill gaps in their property insurance policies. A technology firm purchased parametric insurance to cover business interruption losses from tornado risks, while a coastal municipality used parametric hurricane insurance to top up its coverage for debris removal and address beach erosion.
Greenlight Re provides capacity to start-up WeatherPromise
US • Travel • Weather
Reinsurer Greenlight Re is providing capacity to US-based start-up WeatherPromise. WeatherPromise, which launched earlier this year, helps companies selling accommodation, outdoor activities or events to embed parametric weather protection at the point of purchase.
Morocco earthquake could trigger $250m pay-out
Morocoo • Earthquake
Insurance Insider reports that the Moroccan government is covered by a parametric earthquake insurance policy that is expected to be triggered by the 6.8 magnitude earthquake on 8 September 2023. Gallagher Re is the broker for the policy, backed by more than 20 reinsurers. The policy is understood to have a limit of $250 million USD with pay-outs triggered by earthquakes of magnitude 5.0 or greater.
$1bn+ of risk transferred to CCRIF at 2023 renewals
Caribbean • Central America
The Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC), which provides parametric catastrophe coverage to governments and public utilities in the Caribbean and Central America, has released details of the policies purchased for the 2023/24 policy year. Governments and public utilities purchased over $1 billion USD in coverage limit for the third consecutive year, with GRENLEC, Grenada’s electric utility company, purchasing coverage for the first time. In total, 66 policies were purchased for the 2023/24 policy year.
Cyber industry loss index for $500m+ events
US • Cyber
PERILS, which publishes insurance industry loss data, has launched a US cyber loss index with CyberAcuView, a data firm owned by Beazley, Chubb, Liberty Mutual and other cyber insurance market participants. This index will report on any systemic cyber incident that affects multiple insurers and policyholders in the US and causes more than $500 million USD of loss to the insurance industry. For catastrophic risks such as US hurricanes and earthquakes, some insurers purchase parametric reinsurance with pay-outs based on an industry loss index. This new cyber loss index could be used for similar parametric reinsurance products or catastrophe bonds in the future.
Find out what you’ve missed…
Issue 55 – Parametric reinsurance for emerging climate risks
Issue 54 – Parametric insurance for weather variability
Issue 53 – Parametric insurance enabling crucial financing
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