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The InsTech perspective… parametric insurance with social impact
This week’s issue features a new parametric insurance grant programme from Chainlink and Etherisc. Grants, funding and technical support from international institutions such as the World Bank and United Nations (UN) have enabled many parametric insurance programmes with positive social impact. As awareness of parametric insurance grows, more companies from both inside and outside the insurance industry may offer similar support to parametric programmes with positive social impact as part of their ESG activities.
The World Bank was involved in establishing the Caribbean Catastrophe Risk Insurance Facility, the first multi-country parametric risk pool. The UN Capital Development Fund developed a parametric cyclone microinsurance product now being tested in Fiji. The Global Index Insurance Facility, a World Bank programme, recently ran an Agtech and Inclusive Insurance Challenge. It awarded the highest grant to Omishtu-Joy, an agtech start-up creating data collection devices. This is addressing an issue highlighted in the latest contribution to the IPCC’s Sixth Assessment Report, which discusses how “data and modelling gaps” in vulnerable countries is holding back parametric insurance.
We’ve previously written about the challenges of getting parametric insurance products to market: cost, data and lack of education. Support from international institutions, governments or the private sector is often needed when using parametric policies to insure the most vulnerable communities against climate events.
We’ve started work on the upcoming InsTech report, "Parametric Insurance - the 100+ companies to watch". If your company is not an InsTech corporate member, or we are not already talking to you, you may be missed out. To make sure your company is included, or to discuss opportunities for expanded coverage, contact Henry Gale on LinkedIn or email email@example.com.
Are you looking to implement algorithmic decision-making in the underwriting process for parametric insurance products? The latest InsTech report, “Algorithmic Underwriting in Specialty Insurance: An implementation guide in six case studies”, features case studies from early implementers including Vave, Ki, Rethink and Chaucer. Automated underwriting was the topic with the highest interest among insurers in our recent survey of 150 InsTech members.
Many companies offering parametric insurance use a managing general agent (MGA) model, underwriting insurance policies on behalf of an insurer. Some newer tech-enabled MGAs have become, or are considering becoming, full stack insurers themselves. At the next InsTech London event at The Steel Yard, sponsored by PKF Littlejohn, we will examine what making the transition from MGA to insurer involves. The event is free to start-ups less than two years old and InsTech corporate members. InsTech corporate members can now sign in to our website to register for events: details on the website.
In the news...
Mali • Drought • Humanitarian aid
The World Food Programme (WFP), a humanitarian organisation and part of the United Nations, will receive a $7.1 million parametric pay-out to support aid efforts in Mali. The pay-out under WFP’s parametric insurance policy with the African Risk Capacity was triggered by lack of rainfall in Mali during 2021. The WFP will use the money to provide cash transfers to 161,000 people and nutritional support and services to more than 20,000 children under the age of 2.
Blockchain oracle provider Chainlink and decentralised insurance platform Etherisc have launched a grant programme to support blockchain-based parametric insurance products. Proposals can include research, technical development and product ideas for positive social impact. Applications are open until July 1, 2022.
US • Weather
A case study from analytics platform Demex shows how parametric insurance can be used to cover individuals and businesses against extreme weather such as heatwave, snow and extreme cold. Demex has partnered with Vave to include extreme temperature coverage in Vave’s commercial property insurance product, which we wrote about in an article last December.
Climate • Agriculture
The Intergovernmental Panel on Climate Change’s (IPCC) Working Group II contribution to the Sixth Assessment Report referred to parametric insurance as a significant innovation in climate risk insurance. The report refers to the importance of accurate data and models for the countries most vulnerable to climate change, and the use of parametric insurance to support the resilience of both individuals, such as smallholder farmers, and governments.
Reinsurance • Placing platform • InsTech report
Reinsurance pricing and placing platform Tremor, founded in 2018, has launched RetroParametric, a function that allows reinsurers to buy and sell parametric retrocession reinsurance. Read more about Tremor in InsTech London’s report “E-Trading Platforms: Challenges, Opportunities and Imperative”, currently free to download.
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