The Parametric Post, the only newsletter dedicated to parametric insurance.
Thought for the day… parametric travel insurance goes global
Since the claims process is one of consumers’ greatest frustrations with insurance, the concept of parametric insurance should be appealing to consumers. There is no traditional claims process: instead pay-outs are made almost immediately when a trigger event occurs. Many companies have designed parametric insurance products for consumers, but few have been successful at scale. Travel insurance is one of the early success stories.
Blink Parametric is among the technology firms helping insurers such as Zurich integrate flight disruption coverage into their travel insurance policies. If a policyholder’s flight is delayed or cancelled, or their luggage does not arrive as expected, they can receive automatic compensation with a cash pay-out or lounge access. Recent announcements have seen insurers offering parametric travel disruption insurance from Ireland and Switzerland to Canada and Singapore.
Meanwhile, a few hotels and resorts around the world are now offering parametric protection against weather events to their customers. These include ski resorts in Europe compensating their customers if there is too little snow and golf courses in the US offering refunds if it rains. In this week’s Parametric Post, the hotel InterContinental Singapore starts to offer vouchers to its customers if there is excessive rain during their visit.
At least hundreds of thousands of policies offering travel-related parametric protection have been sold worldwide. With recent announcements of new partnerships, we can expect parametric travel insurance to grow faster in the next few years.
Latest parametric opportunities
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$20 million of crop insurance in India, May-Dec 2024
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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…
Chaucer launches parametric weather product for NDBI
Weather • Business interruption
(Re)insurer Chaucer has entered the weather insurance market, offering parametric coverage based on temperature, wind speed, rainfall and other weather metrics worldwide. Chaucer has hired a new team to underwrite these risks, led by Dr Ed Byrns, who previously worked in weather risk transfer at Munich Re and as CEO of MGA Demex. Chaucer says it plans to cover non-damage business interruption risks relating to weather, with a line size of up to $5 million USD.
AXA Climate chooses Reask for cyclone wind speed data
Hurricane • Cyclone • Typhoon
AXA Climate has announced a partnership with risk modelling firm Reask. AXA Climate will use Reask’s calculation agent product Metryc to provide wind speed data used as an index for parametric tropical cyclone policies. Swiss Re Corporate Solutions and Descartes Underwriting already use Reask’s data for parametric tropical cyclone insurance.
Blink Parametric partners with Zurich in APAC on flight delay
APAC • Travel
Zurich Insurance in the Asia Pacific region has integrated Blink Parametric’s technology into its Zurich Edge platform as part of its digital strategy. The parametric travel insurance solution provides policyholders who experience flight delays with access to an airport lounge. Singapore is the first location where Zurich is rolling out the parametric solution.
Energy firm offers customers Raincoat’s parametric wind cover
US • Hurricane • InsTech podcast
Technology company Raincoat, which designs and operates parametric disaster insurance programmes at scale around the world, has partnered with renewable energy firm WindMar Home in Puerto Rico. WindMar Home is offering its customers parametric hurricane protection, underwritten by insurer Óptima Seguros and enabled by Raincoat’s technology. Raincoat’s Co-founder and CEO Jonathan Gonzalez explained how the company is collaborating with brokers and insurers in InsTech podcast episode 268.
Aon: how parametric can protect contractors from extreme heat
North America • Weather • Construction
Aon’s article discusses the challenges of extreme heat for the construction industry in North America. The broker estimates that, in the US, the impact of heat on labour productivity results in estimated annual losses of $100 billion USD. Aon writes about a Texas-based contractor that chose parametric insurance to manage delays and costs associated with extreme heat. The policy pays out if temperature thresholds for extreme heat are met for more than a certain number of days. For those elsewhere in the world, Aon has also published an article on how parametric can help with construction industry heat risks in EMEA.
WTW receives USAID funding for loan ‘resilience wrapper’
US • Climate
The US Agency for International Development (USAID) is providing funding to broker WTW to design a pilot facility to offer parametric coverage embedded in loans to businesses in climate-vulnerable countries. If the borrower suffers a triggering event, such as a cyclone, flood or drought, the insurance pay-out will cover their next loan repayment. The scheme intends to help businesses stay operational and avoid defaulting after a shock event.
World Food Programme in $1m partnership with PCRIC
Pacific • Cyclone • Humanitarian aid
The United Nations World Food Programme (WFP) is providing $1 million USD towards premium financing for the Pacific Catastrophe Risk Insurance Company (PCRIC) as part of a new partnership. Multi-country risk pool PCRIC provides tropical cyclone insurance to governments including Fiji, Tonga and Vanuatu. WFP has worked with other regional risk pools including the African Risk Capacity to help vulnerable populations secure coverage against climate risks.
Parametric start-ups selected for Lloyd’s Lab cohort 12
UK • Marine • Energy
Lloyd’s has selected the companies participating in the next cohort of the Lloyd’s Lab Accelerator programme. They include SHINC, a start-up aiming to launch a parametric product for ‘demurrage’ risk (the cost of cargo spending excessive time at a port); SAMP Risk, aiming to create an MGA for power generation assets including a possible parametric product for breakdown risk; and CatX, a risk exchange start-up focused on alternative capital and parametric risk transfer.
Mexico to renew parametric cover for Pacific coast hurricanes
Mexico • Hurricane • Catastrophe bond
The government of Mexico’s parametric catastrophe bond covering earthquakes and hurricanes expires this month. In the previous Parametric Post, we reported that Mexico was seeking a new catastrophe bond to renew its cover for earthquakes and hurricanes on its Atlantic coast, but not its Pacific coast. Now Artemis says the country plans to renew its Pacific coast hurricane coverage too, after the pay-out triggered by Hurricane Otis last year is finalised.
Revo writes €306k parametric premiums in 2023
Italy • Weather • Travel
A special-purpose acquisition company focused on parametric insurance and specialty risks acquired Italian insurer Elba Assicurazioni in 2021 and rebranded it as Revo Insurance. Revo’s 2023 results show it wrote 20,000 parametric policies for a gross written premium of €306,000 EUR (up from €220,000 EUR in 2022). Revo offers parametric flight disruption policies and weather insurance for SMEs. With average premiums per parametric policy just over €15 EUR, it is likely that flight disruption insurance, which has low premiums, dominates Revo’s parametric portfolio. Parametric only makes up 0.1% of Revo’s overall business by gross written premiums.
India exchange prepares for weather derivatives trading
India • Weather • Energy
In the previous issue of the Parametric Post, we reported that the Indian government has permitted weather derivatives trading for the first time. Now the National Commodity and Derivatives Exchange of India is creating weather indices which companies can use to trade weather derivatives. 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.
Hotel offers parametric rain insurance to guests
Singapore • Travel • Weather
The hotel InterContinental Singapore has partnered with Switzerland-based start-up discovermarket to provide parametric rain insurance to guests in its suite rooms. If it rains for more than two hours (during daylight), guests will receive a refund voucher equivalent to the rate of a single-night room.
Find out what you’ve missed…
Issue 67 – Diversification opportunities for parametric insurers
Issue 66 – When parametric becomes a perk
Issue 65 – Hidden climate risks: the future of parametric?
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