The Parametric Post, the only newsletter dedicated to parametric insurance.
You can sign up for free here.
The InsTech perspective… parametric pay-outs from Typhoon Rai
Philippines • Typhoon
While climate catastrophes such as Typhoon Rai are becoming more frequent and severe, parametric insurance initiatives are working to increase resilience. Recent pay-outs demonstrate the value of parametric coverage and its potential to be rolled out more widely.
Typhoon Rai killed 402 people and damaged over 1.2 million buildings in the Philippines (where it is known as Typhoon Odette) between 16 and 18 December 2021, according to RMS.
Before Rai made landfall, 1,698 vulnerable households were provided with direct cash disbursement after the B-Ready project was triggered. B-Ready, launched in December 2019, is a collaboration between Global Parametrics and humanitarian organisations including Plan International and Oxfam Philippines. The aid agencies select vulnerable households and distribute prepaid cards to be used in the event of a disaster. Global Parametrics monitors tropical cyclones in the Pacific and triggers deposits onto the prepaid cards when a tropical cyclone is expected to make landfall.
Filipino insurer CLIMBS had launched its Weather Protect parametric insurance product for farmers in August 2021, in partnership with IBISA Network and Global Parametrics. The first Weather Protect claim, triggered by Rai, was paid on 3 January 2022. CLIMBS has paid claims to two of the five co-operatives involved in the product’s pilot.
Swiss Re Corporate Solutions has also made a parametric pay-out triggered by Typhoon Rai. The sustained wind speed of the typhoon exceeded the parametric policy’s trigger within an insured area and Swiss Re’s client, a utility company, received a pay-out within days.
The government of the Philippines has a catastrophe bond with a parametric modelled loss trigger for earthquakes and tropical cyclones affecting the country, providing $150 million of tropical cyclone protection. The World Bank issued the bond through the International Bank for Reconstruction and Development in November 2019. The calculation agent for the bond, modelling and analytics company AIR Worldwide, has been instructed to produce a report on whether the trigger has been breached.
Pay-outs after events such as Typhoon Rai highlight the potential benefits of parametric insurance to communities, businesses and governments. In this week’s Parametric Post, Belize, Dominica and Zimbabwe - other countries highly exposed to climate events - start or continue to build their resilience through parametric insurance.
Harry Croydon, Founder and CEO of Micro Insurance Company, spoke to us about why he set up a full-stack insurer, his company’s “parametric-like” microinsurance products and embedding insurance at the point of sale. Micro Insurance Company wrote $12 million in gross written premium in 2021 and has 2.5 million customers.
Parametric insurance is Insurance Thought Leadership’s focus topic for January 2022. Paul Carroll at Insurance Thought Leadership spoke to the Parametric Post’s editor Henry Gale about examples of parametric insurance innovation in practice and trends to look for in 2022.
In the news...
Data and analytics company CoreLogic will provide hail data for AXA Climate’s parametric hail insurance product, Hail Protection. CoreLogic will measure the maximum hailstone size within an insured area. If this size breaches a policy’s parametric trigger, a claim will be paid. Hail Protection was launched in 2019 and AXA Climate says its partnership with CoreLogic will allow it to expand to new customers, including condominiums, golf courses and greenhouses. Seven disasters involving severe hail each caused over $1 billion of losses in 2021.
Belize • Hurricane
Willis Towers Watson has created the world’s first sovereign debt “catastrophe wrapper”. The catastrophe wrapper is underwritten by Munich Re and will protect the government of Belize’s loan repayments against the risk of economic damage from hurricanes. This is part of a trend of innovative parametric solutions to increase the economic resilience of vulnerable countries to climate perils.
The government of Belize has refinanced its sovereign debt with environmental organisation The Nature Conservancy in a $364 million transaction supported by Credit Suisse. The transaction’s catastrophe wrapper is insurance that protects Belize’s creditors against default and shortfall risk in the event of a hurricane affecting the country. Pay-outs are determined by a parametric trigger.
Canada • Travel
Parametric insurance platform Blink Parametric has partnered with MGA AwayCare to sell its flight disruption insurance product in Canada. Policies will be underwritten by insurer Northbridge Financial Corporation. Blink Parametric is owned by CPP Group UK, which also announced the purchase of travel insurance business Alpha Underwriting last week.
Asia • Agriculture • Blockchain
Investor Insurtech Gateway led a €1.5 million seed funding round for agriculture insurtech IBISA Network. Insurtech Gateway’s blog post explains why they invested in IBISA, writing that 98% of smallholder farmers do not have access to insurance. IBISA provides a platform for insurers to build, distribute and operate parametric microinsurance solutions for smallholder farmers. IBISA combines weather data from European Space Agency satellites and observations from local human weather watchers in remote areas.
Dominica • Hurricane • InsTech article
Parametric pay-outs from the Caribbean Catastrophe Risk Insurance Facility (CCRIF) will activate social protection funding under an agreement between the United Nations World Food Programme (WFP) and the government of Dominica. The WFP will provide $300,000 over two years to subsidise Dominica’s premium payments for CCRIF tropical cyclone insurance. If the policy is triggered, part of the pay-out will directly fund assistance to vulnerable people. You can read more about CCRIF in an InsTech London article about its pay-out to Haiti in September 2021.
Zimbabwe • Drought • Humanitarian aid
Humanitarian agency group Start Network has purchased a parametric drought insurance policy for Zimbabwe from multi-country risk pool African Risk Capacity (ARC), at a cost of $2.5 million. Pay-outs from the policy would fund aid agencies’ drought responses and are designed to be triggered before the worst effects of a drought are felt. The trigger is based on the Water Requirement Satisfaction Index which monitors rainfall. Start Network says the policy will protect more than 800,000 people from drought risk during the 2021/22 agricultural season. Issue 12 of the Parametric Post focused on the use of parametric insurance for humanitarian aid, with more details on Start Network and its existing drought policy for Senegal with ARC.
Africa • Asia • Agriculture
The United Nations Capital Development Fund has announced the cohort for Agritech Challenge 2021, a new initiative to support start-ups improving the financial health of smallholder farmers in Africa and Asia. Five of the ten companies selected for the programme, which received more than 130 applications, are involved in parametric agriculture insurance: WRMS, GramCover, CropIn, SatSure and Stellapps. The cohort will benefit from links to industry and market partners, expert mentoring and exposure to a network of investors. The programme will help the start-ups scale operations in Kenya, Malawi, Uganda, Zambia, India, Indonesia and Malaysia.
Supply chain • Blockchain • InsTech podcast
OTONOMI, an MGA founded in 2020 for supply chain insurance, has partnered with Ensuro, a start-up reinsurer licensed in Bermuda using cryptocurrency as insurance capital. Ensuro is providing $11.5 million in reinsurance capacity for OTONOMI’s parametric air freight disruption insurance product. OTONOMI’s policies are smart contracts triggered by data from blockchain oracle provider Chainlink. We interviewed Ensuro’s Founder and CEO Marco Mirabella on InsTech London podcast episode 164.
Canada • US • Agriculture
Farmers Edge, a Canadian agritech company that announced a parametric insurance product for canola farmers with Munich Re in 2021, has established an MGA subsidiary. DigiAg Risk Management will offer parametric insurance products to farmers in Canada and the United States.
Reinsurance • Placing platform • InsTech report
Reinsurance pricing and placing platform Tremor, founded in 2018, transacted $175 million of reinsurance premium in 2021. Since it was launched, the platform has priced $8 billion of reinsurance coverage limit, 16.2% of which is parametric reinsurance. Read more about Tremor in InsTech London’s report “E-Trading Platforms: Challenges, Opportunities and Imperative”, currently free to download.
Data provider Hailios, founded in 2017, has launched an equity investment crowdfunding campaign. The start-up has raised $2.75 million to date and aims to raise a further $1 million through the campaign. Hailios has developed compact ground sensors for hail, which insurers and MGAs including Descartes Underwriting and AXA use to provide the data triggers for parametric insurance products.
Epidemic • Cyber • Climate
An international consortium of companies including terrorism reinsurer Pool Re is funding a public-private research project run by the Cambridge Centre for Risk Studies. The project will investigate innovative financial instruments including parametric bonds to transfer systemic risks such as pandemics, cyber threats, geopolitical change, financial crisis and climate change.
Find out what you've missed...
Sign up using the form below to receive the latest news, stories and insights on parametric insurance every two weeks.