Parametric newsletter

Insurance can serve a social purpose.

Parametric structures are being used to extend the benefits of risk transfer to communities and enterprises that have never accessed it before.

Conventional insurance may be unavailable in areas especially vulnerable to natural hazards, or where it would be too expensive to send loss adjustors to remote locations. The changing climate is exposing people to new risks that insurance has never covered before. A parametric approach can unlock new capacity to protect those who need it.

In this issue of The Insurer’s parametric newsletter, examples include protection for forests, support for low-income farming families in droughts, and payouts to preserve the health of workers in extreme heat.

Whilst many insurance products can build societal resilience, the insurance industry is not always seen as a force for good. This is often caused by claims experiences that fall short of customer expectations. With parametric contracts, insurers and brokers need to take extra care to structure robust policies that will pay out predictably in the event of a loss.

Protecting the public sector

Liberty Mutual Re and Global Parametrics’ Natural Disaster Fund have led the renewal of a parametric hurricane policy for the Mexican state of Quintana Roo, The Insurer can reveal. The MXN200mn ($11mn) policy covers infrastructure including transportation and utilities.

Mexico’s federal government also relies on parametric coverage for natural disaster risks. Its overall catastrophe bond protection has increased by 23 percent in 2024; all the cat bonds that protect it are parametric.

The Bahamas could be the next Central American country to scale up its use of parametric insurance, as it plans a public-private partnership to protect vulnerable communities against natural catastrophes.

In the Global Risk and Resilience Fellowship’s second year, city leaders from the UK, US and Africa will work with the private sector to explore how parametric insurance can help cities manage climate shocks. The programme is run by the Sustainable Markets Initiative, Howden and the Resilient Cities Network.

Product launches

AXA Climate, part of the AXA group specialised in parametric insurance and climate consulting, is exploring the development of forestry insurance solutions in Europe.

MGA FloodFlash has made its parametric flood insurance product available across the mainland US in an expanded partnership with Munich Re Specialty.

MGA acquisitions and closures

NormanMax Insurance, the parametric specialist that launched Lloyd’s Syndicate 3939 in May, has acquired MGA New Paradigm Underwriters. NormanMax chairman, president and CEO Brad Meier had also co-founded New Paradigm in 2013.

Tropical cyclone MGAs Assured Risk Cover and Redicova appear to have ceased operations, highlighting the challenges of selling parametric disaster insurance to individual households and small businesses.

Covering individuals at scale

Instead of selling policies to individuals one by one, insurers are increasingly distributing parametric coverage in ways that reach many beneficiaries at once.

Swiss Re reinsures a program for the Self-Employed Women’s Association, a trade union in India which protects 50,000 of its members against extreme heat. The parametric policy recently paid out to 46,000 of them, protecting their incomes so that they do not need to work in the most dangerous temperatures.

Allianz has launched a program in Colombia where parametric protection is embedded in loans for avocado and coffee farmers. Over 1,000 farming families have been covered against drought and excess rainfall.

The InsuResilience Solutions Fund has signed grant agreements to help expand parametric drought and excess rainfall insurance programs in Burkina Faso and C?te d’Ivoire. In Burkina Faso, the insurance is distributed through microfinance institutions; in C?te d’Ivoire, group policies are provided through agricultural cooperatives.

The ISF is also extending its premium support for the Indian state of Nagaland’s parametric coverage for heavy rainfall in monsoons.

Boosts for parametric specialists

One of the startups helping grow the parametric insurance market across Africa and Asia is Ibisa Network, which has announced a $3mn funding round.

Meanwhile Revo Insurance, the Italian insurer specialised in parametric and specialty solutions for SMEs, has had its S&P rating upgraded to A-. This is the insurer’s second upgrade after being acquired by a parametric-focused SPAC.

People moves

Gareth Davies has joined Howden as head of parametric solutions, leaving his role as managing director, parametric solutions at Price Forbes Re.

Munich Re has hired Jack Faure as head of parametric nat cat solutions. Faure previously worked at parametric advisory firm Parameter Climate.

Scor has also added Marsh’s Olga Chestiperova to its alternative solutions team as senior underwriter.

Rain stops play

The Dick’s Sporting Goods Open, a PGA Tour Champions golf event in New York, is covered by parametric insurance for the third consecutive year, protecting the organisers’ revenue if it rains. Vortex Insurance, a subsidiary of Mitsui Sumitomo, is providing the coverage.

Weather is becoming an increasingly important issue for sports fixtures, as athletes start to voice health concerns over the risk of extreme heat during the Paris Olympics.

In a recent report, AXA Climate said that dangerous temperatures for marathons will become doubly frequent in Paris by 2050, while snow cover in Turin would rarely meet the threshold needed for biathlons – making it harder to organise Summer and Winter Olympics events.

As weather risks evolve, more sports organisers may start to adopt parametric insurance to protect their revenues.

Parametric covers, historically a niche, are moving into the mainstream. The Insurer’s free-to-view Parametric Newsletter analyses the latest news and developments in parametric and alternative risk transfer every two weeks. Press 'subscribe' to stay informed on all the ways communities, businesses and insurance companies are using innovative forms of coverage for climate, catastrophe and emerging risks that are otherwise difficult to insure.

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