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The InsTech perspective… parametric protection against drought risk
In our news this week, we see more parametric solutions being used to tackle droughts around the world. CelsiusPro and insurer Hollard Seguros are planning projects to insure livestock in southern Africa against droughts, while a similar initiative already running in Kenya is paying out claims. The World Food Programme is working on a weather index insurance product for Cuba as it recovers from drought, and the Jamaican government is promoting its drought coverage for farmers. Descartes Underwriting, an MGA specialising in climate parametrics, is entering the Asia-Pacific region, which has seen many droughts in recent years. Global warming, which is causing droughts to be more frequent and severe, and better rainfall data from satellites and ground sensors, are driving this trend in coverage which we expect to continue.
Cryptocurrency • Blockchain • InsTech insight
Ensuro, a start-up creating a decentralised underwriting solution for parametric insurance products, has launched its website and whitepaper. The paper sets out in detail how Ensuro will use smart contracts and NFTs connecting crypto investors, risk model providers and policyholders to enable parametric insurance products. We spoke to founder and CEO Marco Mirabella earlier this year.
In the news…
Singapore • Australia • Weather
Descartes Underwriting, an MGA offering parametric insurance products for climate risk, has announced it will open offices in Singapore and Sydney. Descartes, which has raised $21.5 million in funding, already has offices in Paris, New York, London and Houston.
Africa • Agriculture • Weather
Droughts damage pasture land, which can result in losses due to malnutrition, frailty and disease in cattle. Parametric data provider CelsiusPro and insurer Hollard Seguros have collaborated on a study assessing the feasibility of livestock index insurance in Namibia, Botswana and Mozambique, countries which have suffered severe droughts. The final report from their study suggests launching pilot projects in Namibia and Mozambique, partnering with local insurers and agri-service providers.
Caribbean • Hurricane
AXA Climate will be the insurer for a parametric policy protecting the Mesoamerican Reef in the Caribbean Sea against hurricane damage. Willis Towers Watson, InsuResilience Solutions Fund and the Mesoamerican Reef Fund have worked together on the project. Pay-outs are triggered when hurricanes enter a defined area around an insured reef site.
US • Climate • Earthquake
The Climate Insurance Working Group, established by California’s insurance commissioner, has made 40 policy recommendations, including expanding parametric insurance coverage. The report says parametric policies could “protect against threats where insurance is uncommon, assist vulnerable populations, or stabilise local government tax revenue in the aftermath of disasters.” We interviewed Kate Stillwell, CEO and founder of Jumpstart, which provides parametric earthquake coverage in California, on podcast episode 104.
Caribbean • Hurricane
Elsa, the first hurricane of the 2021 Atlantic hurricane season, caused damage across North America in July. The Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) has paid $2.5 million to the government of Barbados under its parametric tropical cyclone and excess rainfall policies. It has also paid $528,512 to Haiti, St. Lucia and St. Vincent and the Grenadines.
Jamaica • Agriculture • Weather
The Government of Jamaica has partnered with GraceKennedy Insurance to launch GK Weather Protect. The product protects farmers against drought, excess rain and wind damage. Jamaica’s Minister for Agriculture announced last week that the first 1,000 people who sign up for the policy will receive a subsidy on their first premium payment.
Cuba • Agriculture • Weather
The World Food Programme is developing a pilot project for parametric weather index insurance in Cuba, in partnership with agriculture insurance technology company Pula. Pula conducted remote training on parametric insurance in the areas of eastern Cuba to be targeted for the pilot.
Kenya • Agriculture • Weather
The Kenya Livestock Insurance Program (KLIP), created by the Kenyan government in 2015, has paid 297 households approximately $50 each to cover losses from droughts in northern Kenya. KLIP has used CelsiusPro as a calculation agent, and is supported by the World Bank, Swiss Re and local insurers.
Fiji • Agriculture • Weather
The United Nations Capital Development Fund (UNCDF) is implementing a project that aims to improve the financial resilience of Fiji to climate change and natural hazards with parametric coverage. Weather Risk Management Services (WRMS), an India-based climate and agriculture risk management company, is providing technical support to develop the parametric weather index.
Australia • Cyclone • Weather
Epsilon Underwriting, based in Sydney, has started offering parametric coverage to the Australian market. It will provide protection against extreme weather and natural catastrophes.
InsTech London has profiled over 50 companies active in the parametric insurance space in our report Parametric Insurance – 2021 outlook and the companies to watch, which is available to download. The report is free to InsTech London corporate members, who can contact [email protected] to get access.
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