Building on last year’s launch of a solution to help corporations better manage climate risk and climate change exposure, with the help of parametric risk transfer to captive insurance structures, Arbol has now launched a new climate risk focused parametric insurance captive in Connecticut.
Climate Risk Insurance Company is touted as the first captive insurer to be solely focused on climate risk management.
Arbol, a technology-led company focused on parametric risk transfer and weather insurance markets, launched its Captive+Parametric offering last year, to broaden the availability of parametric insurance solutions to corporate buyers needing to manage exposure to climate and weather related perils.
Climate Risk Insurance Company has been launched as a Connecticut domiciled sponsored captive, with a sole focus on helping businesses and corporations manage a range of climate risks, such as temperature, rainfall, and catastrophic storms, Arbol said.
“Arbol provides a full service, end-to-end risk management and transfer solution for managing climate risks using a technology and data driven platform,” explained Hong Guo, Chief Insurance Officer, Arbol.
“The formation of Climate Risk Insurance Company further extends Arbol’s services towards climate risk retention and management. We are excited about our capability to help corporations operationalize their climate risk management process using our full suite of services, tools and products.”
“We are pleased that Arbol has chosen Connecticut to domicile the first captive company focused solely on climate risk management,” added Fenhua Liu, Deputy Commissioner and Director, Connecticut Captive Insurance Division. “Climate risk is an important but underutilized use case that the Arbol team has identified for how captives can be used to help corporations proactively manage emerging risks.”
The addition of another captive carrier and an onshore United States structure at that, should help Arbol sell more of its parametric weather, climate and catastrophe exposures to corporate risk managers there.
As climate risk increasingly gets measured on corporate balance-sheets, the need for effective and capital efficient solutions to carve out and transfer that risk off-balance-sheet is growing.
Parametric triggers can be designed to carve climate risk out, using data and parameters to throw understanding around the exposure, so that risk transfer structures and arrangements can be created to allow the risk to be passed to captives, or transferred to other risk capital providers.
For large corporations, in future we believe there will be significant benefits to segregating climate exposures on a parametric basis in this way, to carve them out and transfer them off balance-sheet.
It opens up options to tap into the capital markets as well, given the appetite for non-correlating weather and catastrophe exposures among large investors.
Arbol’s new captive insurer should be able to interface directly with reinsurance capital providers, as well as alternative capital.
As corporate climate risk transfer needs grow, we expect more large companies will look to establish their own climate captive insurance vehicles to help them carve out and manage climate risk away from their main balance-sheets.