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The InsTech perspective… parametric companies raise $300m in 2022
In 2022, companies specialised in parametric insurance have raised more than $300 million USD in funding, which is more than the funding in all previous years since 2013 combined. Investors chose to back both larger scale-ups and early-stage companies across 27 deals in 2022. The investments will stimulate growth of the parametric market in 2023, as companies spend their funds on business development and designing new products that respond to customer needs.
The record figure is partly driven by large funding rounds from scale-up companies. Climate-focused Descartes Underwriting raised $120 million USD; Stable, which covers commodity price risks, raised $60 million USD; and supply chain specialist Parsyl raised $25 million USD in Series B rounds.
But this is not the full story. Seven parametric start-ups raised seed funding in 2022, more companies than in any previous year. Among them, Plover Parametrics and Raincoat raised the most, with seed rounds of $4.8 million and $4.5 million USD respectively.
Like the rest of the technology sector, parametric insurance companies have been affected by the global slowdown in start-up funding towards the end of this year. More than 90% of parametric funding in 2022 happened in the first half of the year. Otonomi’s $3.4 million USD funding round in October made it one of just a few parametric companies to announce new funding in Q4.
Of course, it is not just start-ups and scale-ups that are growing the parametric insurance market. In August 2022, Swiss Re Corporate Solutions reported that sales of its parametric products had increased by more than 40% since 2021. We have spoken to many insurers, brokers and MGAs this year that are entering the parametric insurance market for the first time or growing their involvement.
As the market grows, more people from inside and outside insurance are showing an interest in tracking parametric insurance news and insights. The Parametric Post has grown by hundreds of subscribers during 2022. If you joined us recently, you may have missed some of our great articles and podcasts, so we have added to this issue a round-up of our best parametric insurance content from the year. The Parametric Post will be back in January 2023 with the latest updates into parametric risk transfer globally.
The Demex Group: tackling the challenges of severe thunderstorm risk
US • Thunderstorm • InsTech interview
“Many corporates and insurers are exposed to severe thunderstorm risks and looking to buy protection… There is now an opportunity to underwrite severe thunderstorm risks with more confidence.” Matt Coleman, Chief Risk Officer of The Demex Group, discusses the severe thunderstorm insurance protection gap and explains Demex’s new parametric risk transfer solution, Retained Climate Risk Reinsurance.
McKenzie Intelligence Services: modelling catastrophe losses post-event
InsTech podcast
McKenzie Intelligence Services’ (MIS) Daniel Grimwood-Bird joins Matthew Grant and Ali Smedley on InsTech podcast episode 219. MIS provides catastrophe event response intelligence to the insurance market using various data sources. Claims service provider Brush Claims’s Troy Stewart discusses how Brush works with MIS and Daniel explains how MIS data is being used for parametric insurance.
In the news…
$10m Arbol pay-out to insurer after Hurricane Ian
US • Hurricane • Reinsurance
US property and casualty insurer Centauri Insurance received $10 million USD from its parametric reinsurance with MGA Arbol on 21 October 2022, after Hurricane Ian triggered a pay-out. Instead of using a parametric trigger based on wind speed across a large area, the trigger is based on wind speeds at each property in a notional portfolio. Centauri’s CEO says the policy from Arbol has enabled the insurer to process claims more quickly.
Case study: Descartes pays Australia flood claim
Australia • Flood • Business interruption
According to the Insurance Council of Australia, insured losses from floods in the country since 2019 have reached $8.8 billion AUD. Descartes Underwriting’s white paper explains that recent flood losses have resulted in increased premiums for indemnity-based flood insurance and delays in claims assessments. In Descartes’ case study, a manufacturing company in Brisbane that suffered losses in previous years chose to purchase parametric flood insurance in 2020. The policy paid out $5 million AUD after floods in 2022 to cover repair costs and business interruption.
SCOR announced as reinsurer behind Fiji microinsurance
Pacific • Cyclone • Agriculture
The United Nations Capital Development Fund (UNCDF) has been piloting parametric microinsurance products in the Pacific since 2021. The first pilot was launched in Fiji in August 2021 and the product is now being expanded to Vanuatu and Tonga. SCOR has announced that it is the reinsurer backing the products in partnership with local insurers.
Broker network to distribute Bounce’s earthquake cover
New Zealand • Earthquake
MGA Bounce, which sells parametric earthquake insurance to individuals, small and large businesses in New Zealand, has partnered with independent broker network Insurance Advisernet. Insurance Advisernet will distribute Bounce’s earthquake insurance through its network of 65 independent brokers.
Predicted Senegal drought triggers aid funding
Senegal • Drought
Start Ready, a risk pool that uses parametric triggers to provide funding to aid agencies when a climate shock is predicted, will pay out £330,000 GBP to support humanitarian aid in Senegal. Start Ready’s modelling anticipates a drought season in 2023, triggering the pay-out. Start Ready was set up at COP26 as a predictive disaster risk financing initiative; different to the usual approach to parametric risk transfer when pay-outs are triggered after loss events.
Vitesse partners with FloodFlash and Yokahu on payments
Flood • Hurricane
Payments company Vitesse has announced partnerships with parametric MGAs FloodFlash and Yokahu. FloodFlash and Yokahu use Vitesse’s payments solutions to make parametric pay-outs quickly.
In case you missed it…
Our podcasts
The InsTech podcast has hosted several parametric insurance innovators in 2022. You can listen on all good podcast platforms.
Episode 210: Nader AlSalim: Founder and CEO, Gaia: The new way to pay for IVF
Our articles
You can find our interviews with companies working in parametric insurance here, along with our analysis of trends in parametric.
Four challenges facing parametric insurance: why isn’t parametric more widespread?
Member Spotlight: Chainlink Labs
Member Spotlight: Descartes Underwriting
Member Spotlight: Blink Parametric
Oasis Loss Modelling Framework: democratising catastrophe modelling
McKenzie Intelligence Services: providing data-driven intelligence
ChAI: parametric insurance for commodity price risks
OTT Risk: a new approach to business interruption insurance
Ensuro: an alternative source of insurance capacity
Parametric initiatives at COP27: what you need to know
Our report
In June, we released our comprehensive report into the parametric insurance market, with an overview of parametric insurance trends and details of more than 150 companies providing relevant solutions. The report is free to InsTech corporate members, who can log in to download a copy. Non-members can purchase the report for £500 GBP.
We also recorded a virtual event with Swiss Re, OTT Risk and Raincoat when the report was released, discussing where parametric solutions work best and how the market is changing. You can watch the event on demand here.
Find out what you’ve missed…
Issue 38 – Parametric initiatives at COP27
Issue 37 – Parametric triggers for governments’ disaster risk financing
Issue 36 – Climate change impact on parametric portfolios
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