Skyline Partners and AEGIS London have launched a new active assailant parametric product to provide US small and medium business owners with cover in the event of a shooting.
INSDEX Active Response uses police department data to define when an event has taken place, triggering a non-damage business interruption cover payment of up to $50,000. An initial launch is taking place in Dallas, Texas with the aim of scaling the policy out to other states across the US.
Skyline Partners Co-founder Gethin Jones and Calum Williams from AEGIS London join Matthew to discuss the product’s development and how parametric insurance can help fill the protection gap left by traditional policies.
Talking points include:
- How insurers can work with tech companies
- Using data to create parametric triggers
- Selling insurance products through a broker network
- Launching and scaling a business
- Skyline’s experience of working in the Lloyd’s Lab
Skyline Partners is featured in our ‘Parametric insurance: 2021 outlook and the companies to watch’ report, which is available to download from our Reports section and free for InsTech London members.
More information on the Active Assailant insurance product is available on the AEGIS London website.
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- Realise some of the legal and regulatory hurdles that parametric insurance can encounter
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The parametric platform delivering new insurance solutions - Episode 146 highlights
Matthew: I’m looking forward to this discussion, which brings together two of my favourite topics: insurers finding companies to innovate with and parametric insurance. Gethin, what led you to set up Skyline Partners?
Gethin: I met Laurent Sabatié, the other co-founder, in 2017. We had a shared vision to create scalable parametric solutions with data and technology, targeting the gaps in the existing indemnity market and complementing it with risk transfer solutions.
We are an insurtech MGA. We create indexes and do risk modelling and pricing. We monitor and manage the claims on the indexes we create. We have a technology platform, INSDEX, which administers these products at scale.
Matthew: Can you explain the concept of parametric insurance?
Gethin: Indemnity insurance pays out based on the terms of the policy. With parametric insurance there is an index, with payouts predefined at the underwriting stage. Parametric will never replace indemnity insurance. It suits non-physical damage, contingency and plugging gaps in existing indemnity coverage.
Matthew: Calum, what areas do you focus on as an underwriter at AEGIS London?
Calum: AEGIS London is a Lloyd’s syndicate working closely with brokers in the London market. We are looking at how to make the distribution chain as efficient as possible – cutting costs helps the end clients. We have an online quote and bind platform, Opal, and we are focused on getting new products onto it.
Opal has been running since 2016 and it will write about $100 million of premium this year. It has a wind and hail deductible buyback product, a cargo product and a terror product, which is what I work on.
Our brokers are familiar with it as a tool in their armoury to assist them to sell on our behalf. It is not trying to replace any brokers, but to capture premium that we would not necessarily see in the London market.
Matthew: AEGIS London has recently launched active assailant parametric coverage with Skyline Partners. Can you explain the product?
Calum: We have created an active assailant insurance policy, available in Dallas, to indemnify insurance against shooting events. It is a single-trigger policy, using Dallas Police Department data. If a shooting occurs and is published by the Dallas Police Department within an insured area, the policy is triggered and pays out a pre-agreed limit.
We are targeting small and medium businesses with limits of up to $50,000. There is no loss adjustment process. If a shooting happens, the insured receives the full policy limit. They just confirm that they have suffered a loss or a loss is reasonably foreseeable and we look to make payment within 14 days.
The funds can be used for anything as the client sees fit. It could cover lost revenue, loss of future footfall, loss of attraction, injury costs or legal costs. It could also cover intangible assets. You cannot put a price on the damage to the brand of a restaurant or hotel if a shooting occurs outside. That damage could not be claimed for under a traditional insurance policy.
Matthew: Why did you decide to offer this product?
Calum: The rate of shootings is increasing across the US. There is more data available for underwriting. We have been offering traditional active assailant policies for five or six years.
We have seen smaller businesses, for which traditional policies are too expensive, asking for this product. Clients want immediate access to cash after an event. The last year with COVID has shown that many small businesses cannot wear any financial hit.
We are also offering this product in reaction to a hardening of the US casualty market (insurance rates increasing above inflation). Smaller businesses cannot necessarily retain their current policies. They see our parametric product as a method of filling the gaps of traditional policies (for example if the loss is below a certain value).
Matthew: How are you offering the product to clients?
Calum: We have been working with one broker closely, which had sent in a lot of requests that got us thinking about this parametric product. We floated ideas with them and received good feedback that it covered their insureds’ needs.
At the moment we are doing a proof of concept on a small scale, just in Dallas. We are working with Skyline, which is effectively the coverholder distributing the product for us. We can work with any broker.
This is a product perfect for digital distribution: it makes use of data and it is simple. For us, this product needs to be sold on a large scale. It is a volume play and we will put it onto Opal to distribute it in the future.
Matthew: Gethin, what is Skyline’s role in the active assailant product?
Gethin: We were involved in product development. We worked with Calum and his team to define the structure and index, source the data to price and administer the index.
That is all based on our platform, INSDEX, which performs risk modelling and pricing. We can integrate our platform into quote and bind systems and claims systems.
When creating a product like this, there is equal effort in the development and regulatory sides. We and AEGIS have been collaborating with Clyde & Co to define the policy wording and push it through the regulatory channels at Lloyd’s.
Now the product is live, we effectively operate as the coverholder. We provide all the pricing for the products created through our models and we are the calculation agent. We monitor the data from the police departments. If an event occurs within an insured area, we notify AEGIS and start the claims process.
Matthew: Can you give more details about the trigger for the payout?
Gethin: We have a defined index for what is an active assailant event: a murder or an assault with a weapon. We pull data fields from the Dallas Police Department to find out whether there has been a murder or assault with an insured weapon involved. We don’t insure against attacks with all weapons, for example, poisoning is excluded.
The other piece of the index is the insured area. If a trigger event happens within the area, it notifies the claim.
Matthew: How did you determine pricing?
Gethin: We got the data from the Dallas Police Department and modelled that risk. We worked with AEGIS on the loss ratios and premiums. We created a pricing model, which we are refining as we see how the product performs during its initial launch in Dallas. Then we intend to scale it to other cities and states in the US. Skyline provides pricing models and risk modelling to AEGIS and our other clients.
Calum: Rarely in the terror and crisis management market do we have years of claims data we can use in our pricing models. This time we had lots of data available.
But underwriters don’t necessarily have the right modelling capabilities. Skyline has the knowledge to manipulate the data and build it into a parametric product. We outsourced that to them. It is a new way of underwriting for us and has worked out well.
Matthew: Did you face legal and regulatory hurdles with this product?
Gethin: Yes. One challenge for parametric is that it’s not a class of business in its own right. It has to fit into existing definitions of classes of business. Ideally parametric would become almost a class of business in its own right, but we are some way off that.
Calum: We looked at academic studies about the economic impact on small businesses local to a shooting. We have a limit on the distance from the property where a shooting would trigger the policy.
We also cap the limits. Although we can offer up to $50,000 limits, it cannot be more than 10% of the business's annual revenue or rental income.
We ask the insured to confirm within 30 days that they have incurred or foresee a loss and that the limit they have purchased is appropriate for their business.
Those measures reduce the basis risk and ensure there is no profit being made from buying this policy. It is not there to replace traditional policies, it is an add-on product to provide a small amount of cash immediately.
Gethin: The beauty of parametric products is in covering non-physical damages and contingent losses. When we set the limits we are making sure that what is experienced by the client is what is defined in the index.
Matthew: Have you bound any policies yet?
Calum: We launched it two weeks ago. We have made quite a few quotes but have not bound one yet. It takes time to educate the insureds about buying insurance for shooting events and about parametric. Our London brokers and a few wholesalers are interested and asking us to quote.
As a syndicate, this is our first foray into parametric. It is a proof of concept to make sure the loss ratios are as expected and the product works, and then we will scale it up.
Matthew: How should people get the word out about new products to brokers?
Calum: On our online platform, Opal, we have created our own microsite which explains all our products. Carriers have to market products; they won’t sell themselves. There is also the traditional way of calling brokers on the phone or seeing them face-to-face and explaining the product. We rely on brokers to distribute and sell the product, so we have to explain it to them.
Gethin: New products have to be led by demand. When there is a demand to begin with, we can use the tools available to reach broker networks.
Matthew: Gethin, what other products is Skyline Partners offering?
Gethin: We have just launched a heat stress product for the dairy industry, with 40,000 cows initially. It was developed with agriculture technology company ITK and reinsurer SCOR.
We have launched it in France and then we will roll it out globally. We are looking at the UK and European markets, Latin America and the US. This product is needed because of climate change.
We have developed another product for hurricanes, enhanced with wind fields to reduce the basis risk. We have exciting projects in the pipeline for cyber and marine.
Matthew: How does the hurricane product work?
Gethin: We are targeting public and financial institutions with this product. A traditional ‘cat in the box’ product means that payout occurs when a hurricane of a certain category passes through a defined area.
We have added the concept of wind fields around hurricanes. The product takes account of the wider impacts on the ground of the hurricane through the insured area. There are applications for banks, hotels and agriculture.
Matthew: Skyline Partners was part of a previous Lloyd’s Lab cohort. How did you find the experience?
Gethin: The programme itself was great. But the real benefits of it is what comes afterwards and being part of the community.
One of the reasons Calum got in touch with Skyline was because of our involvement in the Lloyd’s Lab. I’d tell any insurtech considering applying to do so.
Calum: The fact that Skyline had been through the Lloyd’s Lab gave them credibility.
Matthew: Calum, how did you come across Gethin?
Calum: I was listening to an InsTech London event around 18 months ago, where Gethin was talking about the use of data. I thought that Skyline could solve one of our problems: how we could apply parametric insurance to crisis management. We got in touch and 18 months later we have a fully-fledged product.
The benefit of InsTech London for us is hearing about what is going on at the forefront of insurtech and innovation. As a carrier, we want to be the first to understand and adopt new approaches. By the time we read about it in the insurance press, it is almost too late.
Matthew: Gethin, Skyline Partners is a corporate member of InsTech London. Why did you decide to join us?
Gethin: Matthew, we met three years ago at the start of my journey with Skyline. It has been great to have your support because as a startup we didn’t have a big budget for marketing. As members, we hope to have a long-term, mutually beneficial relationship with InsTech London.
Matthew: Any final thoughts?
Gethin: There are many opportunities for parametric out there. If anyone has an idea for a parametric product and wants Skyline to help them develop it, get in touch.