Every so often some new insurance or reinsurance product, or strategy, emerges that shows us a glimpse of the future of this marketplace, often driven by technology, data and the use of parametric triggers.
The latest product to do so is one launched by insurtech start-up Parsyl Inc. this week, which announced the first parametric insurance product for the cargo market, presumably marine and other types of transported cargo.
The product on offer is a cargo coverage for perishables, covering products against spoilage due to temperature variation and using an internet of things (IoT) connected approach of sourcing the trigger input data from sensors.
Parsyl is well-positioned to offer such a product, given its focus since launch has been on becoming a supply chain data platform, with particular use in the insurance and reinsurance industry.
It has launched an entire suite of connected cargo insurance products for perishable goods powered by its IoT data platform, alongside Bermuda based specialty insurance and reinsurance firm Ascot Group.
Ascot has invested in Parsyl, which gives you an idea of how seriously the re/insurer sees the prospect of embedding sensor data within insurance and reinsurance products for supply chains.
The policy is the first and only parametric spoilage cover, protecting cargo against losses due to temperature.
Parsyl’s platform features, “smart sensors and data analytics to automatically generate interactive shipment visualizations, aggregated performance insights and recommendations for avoiding issues with future shipments. These insights help shippers improve supply chain performance, reduce risk and lower insurance costs.”
The data from the smart sensors can therefore be used as inputs to a risk transfer trigger, paying out should temperature move outside of the safe range and into a zone where spoilage of perishable cargo is likely to occur.
“This is an outstanding example of how insurtechs and insurers can partner to bring innovation to the cargo insurance market at a time when supply chain interruptions demand new thinking and new products from Lloyd’s,” explained Andrew Brooks, CEO of Ascot Group. “The power of Parsyl’s data is what enables them to respond quickly to customer needs, eliminate or reduce adjustment costs, and drive down expense ratios – something that benefits clients and insurers alike. We’re thrilled to be backing this truly unique offering.”
ColdCover Parametric, as the product is called, features fully customisable quality triggers and payout levels, with protection based on product-specific degradation algorithms.
That helps Parsyl’s tech to understand if, when and where products have experienced spoilage during shipment or storage and its algorithms can alert customers of temperature breaches.
Payment from the parametric insurance can be made in 72 hours, Parsyl says, helping customers bounce back from losses more readily.
“Niceland has always prioritized food quality and safety above all else. When businesses like ours lose product due to supply chain issues like temperature fluctuation, we can be left in the dark while claims are investigated. By combining temperature monitoring with cargo insurance Parsyl hits two pain points at once – collecting objective data and using it to hold actors in the supply chain accountable,” Oliver Luckett, Chairman of Niceland Seafood said.
“The way Parsyl is using its data to deliver new products and value for hard to insure perishable risks is exactly the type of innovation the cargo insurance industry needs. We are thrilled to partner with a company so advanced in their thinking and technology, meaning we are now able to deliver unique solutions for both clients and markets,” added Gordon Longley, Partner and Head of Marine at McGill and Partners, and partner and advisor to Parsyl.
Why is this another glimpse of our re/insurance future?
Because sensors + data = actionable inputs to risk transfer solutions.
They also are a first step towards creating portfolios of parametric risks, that could be extremely attractive to capital market investors in future, as they scale and require reinsurance backing.
The parametric and data-driven nature of the risks makes them particularly suitable for a portfolio managed approach and a continuous integration strategy of managing a portfolio and matching it with capital.
Parametric portfolios could be dynamic, in terms of new policies flowing in and out, with claims being paid in as near to real-time as contracts and triggers allow, making for a much more dynamic approach to the capital needs to support them as well.
But that’s just one side of it. There’s also the fact that, as I’ve explained before, “With sensors and the data they provide, you could be updating underwriting information, risk metrics, pricing, triggers, tweaking the responsiveness of the risk transfer product all in real-time, creating something that really does offer the kind of responsive experience users demand (or should demand) from finance today.”
Responsive risk transfer begins with product design, which these data-driven parametric solutions are steeped in. It ends with the capital to support them, but the design-based approach to creating solutions to support dynamic management of risk and matching with capital fits incredibly well to these kinds of front-end risk transfer products.
As a result I find these innovations fascinating and cannot wait to see where they lead us.
Finally, as Parsyl is focused on supply-chain data and the internet of things, as its technology and others like it roll out into global supply chains, they will also begin to provide the data on the true pain points within the chain, the causes of supply chain interruption.
That bodes well for the creation of whole new categories of risk transfer, something that will benefit the whole industry and help to drive innovation forwards.
Internet of things (IoT), sensors, data, parametric triggers. Using models backed by real-time data and algorithms to draw boundaries of understanding around risks, helping those in the industry to create entirely new risk classes and risk transfer product categories.
That’s the real promise of technology at the sharp end of risk markets.
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