Mitsui Sumitomo Insurance Co. Ltd. has launched weather insurance in the United States and is targeting itself with 1 billion yen (US$11.2m) in sales within the next three years.
The first Japanese based insurer to launch weather insurance in the U.S. market, the product was developed by subsidiaries Mitsui Sumitomo Insurance USA Inc. and Mitsui Sumitomo Insurance Guaranteed Weather. With a maximum coverage of US$175,000 for an insured claim.
The weather insurance product has a maximum coverage of $175,000 and a premium price of $22,500. Mitsui Sumitomo will be targeting mainly local governments and companies looking to protect themselves against weather extremes. The weather product first rolled out in Kansas, and the Mitsui plans to introduce it to all 50 states. Mitsui said it is looking to expand this weather insurance line globally (Europe are also being targeted), riding on its work in the weather derivatives market.
Edit – 14th Jan:
A press release has now been issued by Mitsui Sumitomo to announce the formation of Vortex Insurance Agency, LLC who will offer these insurance policies in the U.S.
Full press release from Vortex below.
Vortex Insurance Agency Launches-To Offer Comprehensive Line of Weather Risk Insurance Products
MSI GuaranteedWeather, LLC (MSIGW), a leading global provider of weather risk management products, announces the formation of Vortex Insurance Agency, LLC (Vortex) and the launch of a comprehensive weather risk insurance product line in cooperation with Mitsui Sumitomo Insurance USA Inc. (MSU), a member insurer of the Mitsui Sumitomo Insurance Group.
Vortex will offer weather insurance policies designed to mitigate the financial risk that weather poses to entities in a variety of industries throughout the United States. The weather insurance policies, underwritten by MSU, will be sold domestically and will insure against the risks of variations in temperature, rainfall, snowfall, or other weather variables. These insurance products are not intended to replace traditional property and casualty insurance, but to supplement such insurance and help protect against significant, but non-catastrophic weather variations that may result in reduced revenue, increased costs or other disruptions in business operations.
MSIGW President and Co-CEO Brad Davis commented, “While protection from various weather risks has generally been available in the derivatives markets for many years, insurance based products greatly simplify the process and requirements for a business, municipality or individual to help protect itself against the risks of adverse weather conditions/events. The addition of weather insurance products to be sold through Vortex, coupled with MSIGW’s existing capacity to transact in weather derivatives, allows MSIGW to offer our clients comprehensive risk management solutions customized to meet the increasingly precise demands of risk managers today.”
The offering of weather risk products in an insurance format allows medium or small sized companies that were previously unwilling to purchase weather derivatives because of their unfamiliarity with taxation or accounting rules for derivatives to simplify (and expand) their risk management strategies. As a result, risk managers may find weather insurance to be a more readily accepted path to successful mitigation of their financial exposure to weather. MSIGW will continue to market weather derivatives in tandem with the insurance product offerings sold through Vortex.
Mr. Yutaka Mouri, General Manager of Mitsui Sumitomo Insurance Company, Limited, added, “The addition of an insurance based product is a significant step forward and is supportive of our global efforts to develop a comprehensive suite of weather risk management products, an area of significant interest given increasingly dynamic and volatile weather patterns impacting all regions of the world. The addition of US based insurance risk will further diversify an already significant portfolio of exposure to weather around the globe presently being managed by MSIGW.”
Mr. Tetsuro Kihara, President and Chief Executive Officer of MSU, commented, “MSU welcomes the opportunity to partner with Vortex in this dynamic segment of the insurance marketplace.”