Parametric risk transfer contracts sold by specialist managing general agent New Paradigm Underwriters settled within nine days of Hurricane Irma’s landfall in Florida.
Demonstrating the speed with which event reports can be obtained for contracts with parametric triggers, New Paradigm’s product has already been through the calculation process, dealt with by risk modelling firm RMS, using wind speed data from the WeatherFlow network of anemometers.
The fact that the hurricane wind speeds are recorded in real-time by the network of storm hardened anemometers means the data can be made available to the calculation agent quickly after an event, with final settlement information then available to the parties within a matter of days.
In the case of hurricane Irma, the landfall to contract or policy settlement process has taken just nine days.
Evan Glassman, CEO of New Paradigm Underwriters, commented, “Hurricane Irma highlights that the platform of hurricane hardened anemometers works to transparently and rapidly provide a basis for risk transfer contract settlement. 100% of the anemometers worked as designed.”
New Paradigm offers parametric hurricane insurance to commercial and residential customers, and also provides a platform for parametric reinsurance and retrocession to insurance and reinsurance firms.
Glassman also pointed out that general interest in obtaining actual, location-specific wind data has increased following the succession of storms in 2017. “The combination of last year’s hurricanes and the recent impacts of Harvey, Irma and Maria has sparked additional interest in the wind data generated by the anemometer network. Having access to real-time wind data and post-event reports allows for a better understanding of the actual characteristics of an event and its potential effects,” said Glassman.
This is yet another demonstration of the rapid settlement that is possible using parametric triggers. With two major hurricanes having hit the United States in quick succession it’s possible that interest in parametric insurance, reinsurance and retrocession could grow, as these policies can provide the funding liquidity needed to aid recovery from catastrophe events.