Parametric water-level insurance launched in Europe by Swiss Re

Commercial risk transfer and corporate insurance solutions provider Swiss Re Corporate Solutions has launched a new parametric product designed to protect European companies that are exposed to high or low water levels.

A division of the global reinsurance firm Swiss Re, Swiss Re Corporate Solutions increasingly offers tailored parametric insurance products to clients, as it seeks to leverage technology and data analytics to provide responsive risk transfer solutions.

This latest parametric insurance product launch sees Swiss Re targeting European commercial insurance buyers that seek to protect their companies against risks that arise due to either high or low water levels.

Delivered under the mantle of its Innovative Risk Solutions, the new parametric water-level insurance has been named FLOW and the index-based product will provide European countries with a way to mitigate the financial impact of high or low river water levels.

As such, the coverage can protect against lost revenue due to business interruption or increased costs due to risk mitigation measures, factors that impact river-side businesses and those business that operate on rivers as well.

Think tourist river cruise operators, commercial riverine shipping companies, logistics and freight operators who rely on river shipping, river-side restaurants, retail outlets or attractions, and even factories in areas prone to river flooding.

Swiss Re Corporate Solutions said that its experts structured an index formula which references the measured water level at defined river gauges across Belgium, France, Germany, Italy, Luxembourg, the Netherlands, the Nordics, Portugal, Spain, Switzerland and the UK.

This customised index can track Swiss Re’s client’s water level exposure, related to revenues and costs, with each tailor-made contract providing coverage that is calibrated to the individual exposure of the insured.

Being parametric in nature, FLOW can pay-out fixed amounts based on the defined index level, such as for each day the index remains below or above a defined index threshold value.

By closely calibrating the water levels to revenues a responsive parametric insurance product can be created that pays out at precisely the right time for the insured.

“The very dry and warm summer of 2018 left the water levels of most rivers in Europe at record lows,” Thomas Keist, Head Marketing Innovative Risk Solutions EMEA explained.

“Decreased production volume and increased transportation costs were the consequence. Since it is at the heart of our business to insure companies impacted by the effects of natural perils such as drought and heat, we developed FLOW to help them cope with risks like the loss of revenue due to business interruption from high or low water levels,” he continued.

The FLOW parametric insurance product can also be linked to other payout factors, such as increased costs of operation, additional expenses required to mitigate the impacts of river levels, and certain expenses not covered by traditional insurance products.

This is the latest example of parametric triggers being put to good use to protect against real-world corporate exposures by Swiss Re.

Other recent examples include Swiss Re Corporate Solutions parametric haze insurance in Singapore, parametric tsunami derivative product for Japanese businesses, parametric typhoon business interruption cover for Hong Kong, and Brazilian hydro-electric power coverage.