Specialist Lloyd’s insurer AEGIS London is aiming to help small businesses cover a gap in their insurance that becomes evident when an active assailant or shooter event occurs on or near their premises with the help of a parametric index.
AEGIS has teamed up with insurtech Skyline Partners to develop a parametric index for active assailant events, initially focused on the Dallas, Texas area.
The new parametric insurance product is the first policy of its type to be launched by the AEGIS’ syndicate and will provide protection to small businesses against economic losses following a shooting or malicious incident within 250m of their premises.
It achieves this through leveraging open-source data from the Dallas Police Department that is monitored by Skyline Partners parametric risk transfer platform to identify when a triggering event has taken place.
The parametric insurance product will initially be available to SME businesses in the Dallas area for portfolios of up to 10 properties.
Policyholders will be notified of an insured event within 48 hours of relevant data being published by the Dallas Police and theen be asked to confirm that, as a consequence, they have suffered a loss.
AEGIS London said it hopes to make claims payments no longer than 14 days after the event, but hopefully much sooner, with limits of up to $50,000 per event, or a maximum of $500,000 per policy holder, available.
Limits are capped at 10% of an insured’s annual business interruption values or rental income, to reduce positive basis risk with the parametric trigger and to help ensure the product is treated as insurance.
Calum Williams, terrorism underwriter, AEGIS London said, “SMEs are typically the most financially exposed to this type of crime. They are often uninsured and can be faced with substantial legal and medical costs if victims or their families make a claim against them after a violent incident on or near their property. In addition, if their reputation suffers or trading is reduced following an event of this kind, many will face an insurance gap, particularly as some intangible assets are difficult to claim for under traditional insurance policies. Even those with insurance often have high deductibles because events of this nature have become so commonplace. This policy provides clarity of cover, but most importantly pays out quickly after an event significantly reducing the expected adverse financial consequences. This means that insureds are given much needed liquidity at a time of need.”
Laurent Sabatié and Gethin Jones, Skyline co-founders also said, “This parametric insurance product utilises independent and trusted third party data available from the police department’s incident database. The availability of this data has enabled us to create a parametric index and model the risk and price the product at 60 meters (200 feet) resolution for the whole of Dallas utilising data science and actuarial techniques. We also monitor the claims and provide notifications to brokers that an insured event has occurred as soon as the data is made available from the police department.
“The product is proof of our structuring capabilities, INSDEX technology and innovative approach to developing new parametric products for new markets. We were thrilled to work with Calum Williams and the AEGIS London team on this exciting new application and look forward to expanding the scope of coverage to other Cities and States in the US.”
AEGIS London said it wants to roll this new parametric insurance product out to other states, with California and Florida the next on the list.
Locations covered will be those that suffer a high number of shootings and where there is sufficient history of publicly-available police data to allow for accurate historical loss analysis and pricing.
AEGIS London’s parametric group is also exploring the development of parametric insurance or risk transfer solutions for other situations where a reputable data set is available and where there are clearly identifiable insurance gaps to cover.
Shooting events are estimated to cost the US economy around $229 billion per-year, according to a 2019 Joint Economic Committee Report.
Small and medium businesses are often those most affected, as they tend to lack sufficient insurance protection for these types of interruption events and may also lack limits required for legal responses to events that occur on their own property.
Bringing together reputable data sources, with technology, structuring and the parametric risk transfer paradigm can create incredibly useful coverage products for businesses, from small to the largest global corporates.