Specialist London headquartered insurance and reinsurance company Beazley has launched a new product for the Australian market called Weather Guard, which offers businesses a way to acquire protection against specific weather exposures.
Beazley sees Weather Guard as a way that businesses can protect themselves against “weather related revenue shortfalls, while affording opportunities to enhance customer loyalty.”
The product offers protection for weather exposures which Beazley says have historically not been offered cover in Australia, with parametric triggers based on rain, snow and temperature available to clients.
Weather Guard can be customised to suit the client, making it suitable for use in weather-triggered sales promotions or prize giveaways, as well as for providing weather insurance in order to stabilise revenue or better manage the costs associated with weather variability or extreme weather events.
For its weather insurance products Beazley uses weather data from more than 5,500 weather stations worldwide, providing information going back over 40 years. This granular data allows Beazley to assess the weather exposure of clients, rate and price the insurance product, construct parametric triggers based on actual weather conditions that would impact the client and tailor the protection to their specific needs.
Katie O’Neill, Contingency Underwriter at Beazley Australia, explained one use-case for Weather Guard, saying; “Just one example of how this product could be used is by hotels and resorts.
“The hotel could take out a Weather Guard policy that allows them to provide guests with an accommodation voucher for a complimentary future stay if the guest experiences consistently terrible weather during their current visit.
“In this way, our insurance product turns an unfortunate circumstance that is largely beyond the insured’s control and an unhappy customer into an opportunity for the hotel to build a loyal customer base and promote their brand”
The client seeking the insurance can work with Beazley to define the ideal trigger, based on actual recorded weather data from rainfall, snow and temperature, to construct a parametric source of insurance protection matched to the conditions that would impact its revenue, or that fit the use-case in the case of a promotion or giveaway.
Damian Kerin, Head of Contingency at Beazley Australia, commented; “Weather Guard is not one size-fits-all and Beazley underwriters work with clients to adapt and craft the Weather Guard cover, so it is tailored to your client’s individual needs.
“A beachside café or ice cream shop may experience significant losses if there is a cold front in the middle of summer. Similarly, schools, hospitals and care facilities may experience higher energy costs after longer than usual periods of hot weather.
“These organisations can use a Weather Guard policy to protect their profits against these additional costs.”
Beazley said that key target categories for Weather Guard are businesses that are highly seasonal and which rely on a brief window for the bulk of their sales, as well as organisations that incur costs as a result of bad weather.
Weather linked insurance or indeed reinsurance is expected to be a growing area, having shown much promise but then been slow to take off. As investors become increasingly aware of the impact that weather variability or severe weather can have on their holdings, the pressure on company owners and boards to protect themselves is expected to grow.
The insurance-linked securities (ILS) market is well positioned to take advantage of any growth in weather risk insurance, as a provider of large, customised weather linked covers direct to big corporates, or as the providers of weather linked reinsurance cover on a collateralised basis.