Mitsui Sumitomo rolls out parametric weather insurance product to address climate risks

Mitsui Sumitomo Insurance, a subsidiary of MS&AD Insurance Group Holdings, has unveiled its new parametric insurance product, “Weather Insurance Index”, a new offering designed to help insurers manage financial losses caused by severe or unusual weather.

As a parametric solution, the product has been designed to provide an automatic fixed payout whenever predefined weather conditions are met.

The product relies on an index built from key weather data points, including temperature, rainfall, wind, snow, and sunshine.

Once the data crosses the agreed threshold, claims are settled swiftly and efficiently, without the need for a physical damage assessment.

The Japanese insurer noted that the need for risk transfer is increasing, while also highlighting how traditional insurance continues to encounter obstacles, including the challenges associated with loss assessment, which places a significant strain on both clients and insurance providers.

This method also faces difficulties in delivering adequate compensation, except for risks related to property damage that are covered by fire insurance and similar policies.

“Index insurance’s features, such as “prompt payment of claims” and “high transparency in determining liability/non-liability,” are highly compatible with weather risks and are expected to contribute to eliminating protection gaps. Therefore, we developed it to address these challenges,” Mitsui Sumitomo explained.

The insurer also said that its new solution is part of its commitment towards supporting a resilient and sustainable society, while also noting that sales of its Weather Insurance Index will continue at the new company formed through the merger with Aioi Nissay Dowa Insurance Co., Ltd., which is scheduled for April 2027.