Global Parametrics has designed and structured a new parametric hurricane insurance product that is now being sold in the Caribbean country of Dominica and is backed by the capital from the firms Natural Disaster Fund (NDF).
The parametric and index-based disaster risk transfer company is working alongside a statutory agency of the government of Dominica, the Climate Resilience Execution Agency for Dominica (CREAD).
It’s said to be the first individual parametric hurricane or tropical storm insurance product available in the Organisation of Eastern Caribbean States.
Named Flexible Hurricane Protection (FHP), a pilot had been launched just prior to the beginning of the 2021 Atlantic hurricane season.
The Flexible Hurricane Protection (FHP) insurance product utilises a parametric trigger to pay out rapidly after storms or hurricanes, with no need for claims assessment and adjusters.
It provides protection against the occurrence of strong winds caused by tropical storms or hurricanes, so there is no need for damage to have even occurred for a payout to be due, making it a suitable source of income and business protection.
We understand the parametric insurance is being sold through credit unions and cooperative societies, with a plan to roll it out more broadly.
Payouts are based on storm strength and the parametric insurance is expected to be particularly of interest to small business people, especially in agriculture and the fishing industry.
The parametric insurance product runs on a blockchain technology system, through which it is hoped payouts can be made even faster, with policy details stored on the blockchain and storm parameters used to notify of payouts due.
Policies can be as small as providing US $200 of protection, up to US $100,000 and can be purchased using a mobile application that acts as a digital wallet.
We understand that payouts are expected to be made automatically back to those digital wallets as well, increasing the efficiency of the product.
Global Parametrics has structured the risk transfer product and its Natural Disaster Fund (NDF), an insurance-linked investment fund pool of reinsurance capacity that had been originally seeded by the UK’s Department for International Development (DFID), is understood to be the reinsurance capacity source to underpin this new parametric hurricane insurance product in Dominica.
We understand that other Caribbean island nations are now considering whether a similar product could work for their population as well, meaning there is a chance of rolling this solutions out more broadly in the region.