WICA2023 MEDIA RELEASE: Government-funded parametric insurance explored at WICA 2023

Government-funded parametric insurance to assist in recovery after natural disasters will be discussed in a panel session at the AIDA XVI World Insurance Congress in Australia (WICA 2023).

The Australian Insurance Law Association (AILA) will host the international insurance law association AIDA’s flagship event on 30 August to 1 September 2023 at the Melbourne Convention and Exhibition Centre.

Avryl Lattin, a partner with Clyde & Co, will speak on innovation in insurance product development and regulation.

She will suggest Australia could follow the lead of some developing countries where parametric insurance is used to enable quick post-disaster payments to help cover costs of rebuilding.

Parametric products insure against the occurrence of a specific event. Policies pay a predetermined amount based on the magnitude of the event, rather than any actual loss.

Ms Lattin said the Australian insurance industry responds well after natural catastrophes, but it takes time to get loss adjusters on site and repairs conducted.

“With a parametric policy, once a flood reaches a specified level, payment can be made immediately.” She will suggest governments could include parametric insurance as part of their long-term resilience planning.

“It could be a cheaper option than having to fund major disaster relief programs after natural catastrophes.” Ms Lattin will also suggest captive insurance companies may become a larger part of the Australian insurance environment, but regulatory change would be required to encourage large organisations to establish onshore captives.

Captive insurers are wholly owned subsidiaries that provide insurance for their parent companies. “It’s effectively self-insurance with reinsurance backing,” Ms Lattin said.

Many major Australian companies establish captives overseas in countries like Singapore and Bermuda where the regulatory regime is more conducive.

“There needs to be discussion with regulators about the potential for more onshore captives,” Ms Lattin said.

The global captive market is growing and organisations are broadening the lines they are insuring through captives. A Marsh 2022 Captives Landscape report says 8% of all global captives are Australian owned.

Ms Lattin will also suggest a change to regulations for some insurtech products. For example, oneoff contents policies that insureds purchase to cover high-value goods, like electronic equipment.

“Insurers selling these must still follow all the financial services requirements, including providing product disclosure statements, but how does that fit with a low-premium, quick, easy cover?

“Regulatory sandboxes are being trialled overseas to develop lighter touch regulatory environments for specific products,” she said.

The Australian Securities & Investments Commission has developed a regulatory sandbox to enable insurers and other financial service providers to trial innovative concepts. Ms Lattin will join a panel of international and Australian speakers at WICA 2023 to explore regulatory change in the insurance industry globally.

Registration is open for the World Insurance Congress with discounted early-bird offers available until 30 June.

WICA 2023 chair and AILA’s immediate past president Angus Kench says the congress is a unique opportunity to draw international visitors from AIDA’s global chapters to Australia.

The event starts with presentations from each of AIDA’s 13 working parties that closely examine specific insurance issues from global and regional perspectives.

Panelists and expert speakers will then present sessions on four key themes – climate, conflict, ESG, and innovation and careers. The speaker program is continually updated as more global industry leaders commit to presenting at WICA 2023. Australia has hosted the prestigious World Insurance Congress – held every four years – only once before, in Sydney in 1994.

www.wica2023.com