Hidden climate risks: the future of parametric? - The Parametric Post Issue 65
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The InsTech perspective... hidden climate risks: the future of parametric?
While mandatory climate disclosures are starting to make organisations more aware of the financial impact of climate change, some less obvious climate risks remain underappreciated. Do these risks represent the parametric insurance market of the future?
Mitiga Solutions, one of the firms helping organisations with mandatory disclosure reporting, recently told us about some of the novel use cases of its climate analytics.
“Clients use our EarthScan product for pre-transaction due diligence. Understanding how climate could potentially impact return on investment is becoming an increasingly important part of this process. Location planning is another area of high demand. We’ve had clients come to us to understand where they should build their next airport or data centre. … Finally, EarthScan helps clients with supply chain resilience. We can explore how climate change could impact an organisation’s entire operations – not just the assets that they own.” - Kate Rodger, Head of Sales, Mitiga Solutions in a recent InsTech interview .
Arbol’s co-founder and CEO Sid Jha also spoke to the InsTech podcast last year about how investors in property portfolios such as real estate investment trusts (REITs) are likely unaware of how climate risks could affect their investment.
Organisations know they are exposed to catastrophes hitting their property, but climate risks concealed in investment portfolios, business plans and supply chains might be going unnoticed. The exact losses can also be hard to quantify. Parametric risk transfer is well suited to these climate risks and can provide the rapid liquidity organisations need to stay resilient.
Although most companies will not be ready to buy insurance for these risks today, awareness is growing and future losses may force organisations to make them a priority. Insurers can seek out early adopters now to identify hidden risks that could shape the future of the parametric market.
You can read our recent article, 'Insuring interruptions in global supply chains' , to learn more about parametric solutions addressing new risks.
UK ? ?InsTech event
Turbulent times mean threats can arise faster than ever for risk managers. Our next evening event in London looks at the emerging technologies and new products risk managers are using. Generali will discuss how parametric solutions are filling protection gaps, while other speakers include the risk managers from Google, Portakabin and Landsec. Join us on 5 March from 4pm.
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In the news...
Climate ? Earthquake
Reinsurer Munich Re has consolidated its parametric natural catastrophe underwriters into a global team led by...
India ? Flood
Insurer MIC Global has designed a parametric product covering micro businesses and gig workers in India against loss of income caused by floods. The parametric cover uses...
Climate ? Weather
Aon’s Global Insurance Market Insights report for Q4 2023 predicts growth in the parametric market in 2024. As more parametric covers have been tested and...
Philippines ? Agriculture ? Typhoon
In 2023, insurer CLIMBS and technology company IBISA launched a parametric microinsurance product to protect farmers in the Philippines against...
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US ? Hurricane
Coral reefs around islands in Hawaii have been covered by a parametric tropical storm insurance policy since 2022, arranged by WTW with capacity from Munich Re. At renewal, the policy has been...
Africa ? US ? Climate
The US government has entered into an $11.7 million USD partnership with risk pool the African Risk Capacity (ARC), which provides parametric insurance to...
Fiji ? Cyclone
Broker WTW has arranged $450,000 USD of tropical cyclone coverage for the Lau Islands’ coral reef system in Fiji. The policyholder is conservation charity Vatuvara Foundation...
Lao PDR ? Flood
The government of Lao PDR has renewed its semi-parametric flood insurance policy with the Southeast Asia Disaster Risk Insurance Facility (SEADRIF). The updated policy now includes...
Energy ? Price risk
Paratus, which provides insurance policies to protect companies against changes in the prices of fuel and freight, has received an undisclosed investment from private equity firm...
Uganda ? Agriculture ? Weather
Technology company Etherisc has partnered with agritech eSusFarm and Agro Consortium (AIC), a group of local insurers, to launch weather index insurance for farmers in...
Climate ? Catastrophe bonds
The World Bank has announced three extra tools in the ‘crisis toolkit’ it launched in June 2023 to help countries prepare for and respond to natural catastrophes and...
US ? Travel
Travel and insurance company Collinson has expanded its parametric travel insurance solution SmartDelay to the US. SmartDelay provides automated airport lounge access or cash pay-outs to consumers whose...
US ? Energy ? Temperature
Star Group, an energy company operating in 19 US states, has received a pay-out from a weather derivative following warm weather in the first quarter of...
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Thanks for the inclusion Henry Gale! We're proud to be supporting India's gig workers for when flooding leads to loss of income.