The Parametric Post, the only newsletter dedicated to parametric insurance.
The InsTech perspective… diversification opportunities for parametric insurers
Whilst parametric insurance solutions are now available for all sorts of risks across the world, there are still a few uses of parametric risk transfer that dwarf the rest of the market by premium volume. The largest parametric catastrophe insurance portfolios in the market have historically been dominated by North American hurricane and earthquake risk, with a few other hotspots such as earthquake coverage in Japan.
A highly active Atlantic hurricane season and a quake in the wrong place could have a huge impact on the profitability of insurers’ parametric books, while many are already highly exposed to these risks from underwriting conventional property insurance. Now, however, we see more opportunities for parametric insurers to diversify their underwriting across every continent.In this week’s Parametric Post, new parametric schemes are announced in Mozambique and Malawi, while a reinsurer puts capacity behind an MGA to underwrite more parametric reinsurance across Africa.
Berkshire Hathaway Specialty Insurance expands its parametric coverage to wildfire and plans to grow its parametric underwriting outside North America. Meanwhile, a large parametric policy is placed to cover risks in Turkey, typhoon coverage is launched in Vietnam and pay-outs prove parametric works in Japan, Fiji and Brazil.
Managing weather-related business volatility
Weather • Business interruption • InsTech article
Changes in the weather can significantly disrupt demand and operations for companies in sectors such as energy, construction and events, even if they cause little or no physical damage. Our latest article discusses how more organisations are choosing parametric insurance to manage their exposure to variability in the weather.
Latest parametric opportunities
Are you an insurer, MGA or broker with capacity to deploy for parametric insurance?
We know organisations seeking:
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$20 million of crop insurance in India, May-Dec 2024
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$100 million of insurance for Philippines typhoon, Apr-Dec 2024
Can you offer coverage to any of these organisations? Email [email protected] to learn more.
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We are not a broker. InsTech, in partnership with ParaRisk (a joint initiative by 20 Twenty Search and Cerchia), makes paid introductions across the parametric insurance market, including brokers, (re)insurers, MGAs and data providers, to help facilitate transactions and grow the market for everyone.
In the news…
Miller Insurance launches parametric team
UK
London Market broker Miller Insurance has launched a dedicated parametric team. The team is led by Alice Glenister, who was a parametric underwriter at Generali before her most recent role as Director, Insurance at Mastercard. Miller says the team will place coverage for a range of risks, including natural catastrophe, agriculture, energy and cyber.
US supports Floodbase programmes in Mozambique and Malawi
Mozambique • Malawi • Flood
Parametric flood specialist Floodbase has been awarded a grant through the US Agency for International Development (USAID) to launch parametric flood insurance programmes in Mozambique and Malawi. Floodbase will design policies to support smallholder farmers in the East African countries. The African Risk Capacity and Global Parametrics (part of CelsiusPro Group) will support the programmes with underwriting and capacity.
Swiss Re: 1,000 policies issued, Japan pay-out, growth predicted
Earthquake • Hurricane
In an interview with Reinsurance News, Swiss Re Corporate Solutions’ Head of Parametric Nat Cat Martin Hotz says demand for parametric solutions is rising. Swiss Re Corporate Solutions has issued over 1,000 parametric natural catastrophe policies. Hotz said parametric had ‘proven to be an effective risk transfer method’ in recent events such as the New Year’s Day 2024 earthquake in Japan, alluding to claims triggered by the earthquake.
Mexico seeks $360m of earthquake and hurricane coverage
Mexico • Earthquake • Hurricane
The government of Mexico is working with the World Bank to secure a parametric catastrophe bond covering $360 million USD of earthquake and hurricane risks, according to Artemis. This is effectively a renewal until 2028 of its existing parametric catastrophe bond coverage, secured in 2020, which ends this month. While its existing coverage was triggered by Hurricane Otis in 2023, the new bond will not cover hurricanes on its Pacific coast (like Otis). The joint structuring agents are Aon Securities, GC Securities and Munich Re.
BHSI expands parametric coverage to wildfires
Wildfire • InsTech report
Insurer Berkshire Hathaway Specialty Insurance has offered parametric hurricane and earthquake insurance since 2019. It is now also offering parametric wildfire coverage globally since the start of 2024. To find out more about how the insurance industry is grappling with wildfire risks and how parametric wildfire insurance works, download our recent report, ‘Beyond the smoke: understanding and mitigating wildfire risk’.
Inver Re places parametric reinsurance for Istanbul risks
Turkey • Earthquake • Reinsurance
Broker Inver Re (part of Ardonagh Group) has recently placed parametric reinsurance coverage for risks in and around Istanbul, underwritten by several reinsurers. It is most likely to cover earthquakes, although this is not confirmed. The earthquakes that hit Turkey and Syria in 2023 caused $91 billion USD in economic losses, much of which was uninsured.
ASR doubles parametric reinsurance capacity with Inver Re
Africa • Climate • Reinsurance
Inver Re has also helped MGA and reinsurer Africa Specialty Risks (ASR) double its reinsurance capacity for parametric risks. ASR says the capacity has been provided by ‘a leading European reinsurer’ and will support coverage for smallholder farmers, natural perils and renewable energy.
Parametric pay-outs triggered to Brazilian farmers
Brazil • Agriculture • Weather
Five farmers of Brazilian fruit umbu have received parametric pay-outs of $2,781 BRL ($560 USD) each from insurer Newe Seguros. Their insurance policies were subsidised by Brazil’s government. Newe has not disclosed what weather condition triggered the pay-out, but irregular rainfall and drought are common challenges for umbu farmers.
Jamaica plans hurricane cat bond coverage for 2024-27
Jamaica • Hurricane • Catastrophe bond
The Jamaican government plans to purchase a new catastrophe bond to protect it against hurricane risks. Jamaica was previously covered by a parametric catastrophe bond for the 2021-23 hurricane seasons; its finance minister says it is looking for a new deal to cover the next four seasons.
Indian government permits weather derivatives trading
India • Weather • Energy
India’s Ministry of Finance has added weather to the list of commodities for which derivatives trading is permitted in India. Weather derivatives are tradeable financial contracts that are used to hedge against weather risks. They are a form of parametric risk transfer, but unlike parametric insurance, weather derivatives are not regulated insurance products. The most common usage is energy companies hedging against the risk of lower revenues from decreased energy usage in warm winters or cool summers.
US backs new typhoon coverage for farmers in Vietnam
Vietnam • Typhoon • Agriculture
Parametric technology firm Hillridge and insurer Bao Minh, which first announced a partnership last year, have now launched a parametric product covering typhoons in Vietnam. Like the flood programme mentioned above, USAID is providing support for the insurance product. Its first client is an agricultural cooperative whose farmers work on over 154 hectares of acacia plantations.
Find out what you’ve missed…
Issue 66 – When parametric becomes a perk
Issue 65 – Hidden climate risks: the future of parametric?
Issue 64 – Promising signs for the parametric flood market
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