As climate change becomes a topic of increasing focus and with regulations poised to get tighter, the ability to customise parametric insurance solutions suggests that going forward, the product set is going to expand, according to industry experts.
“When I look at available products today, I am quite certain that in 12 and 24 months’ time, we will have an even broader array of (parametric) products available,” said Daniel Vetter, Head of North America, Descartes Underwriting.
His comments came during our recent Artemis Live webcast, The Power of Parametric Solutions for Climate Resilience, held in partnership with the Weather Risk Management Association (WRMA) and supported by Descartes Underwriting.
During the event, panellists explored the past, present and future of parametric insurance solutions.
Currently, explained panellists, adoption is growing at pace on the back of more abundant and advanced data, improvements in modelling, new technology, and heightened acceptance of this form of coverage.
But despite these advancements, there’s still many climate related exposures that perhaps aren’t so well measured, which, according to the panel, presents another opportunity for the marketplace.
“I think the future opportunity is already upon us,” said Vetter. “We’ve talked about this much broader array of available products beyond the traditional quake and wind parametric policy that’s been out there for some time. And, so, while we don’t really have an exact idea where regulations will be heading, I think we should assume, and that’s maybe a good thing, that climate regulations will get tighter. And, they will put a bigger onus on corporates and on us as individuals in an effort to combat climate change.
“We should have the expectation that there will be greater oversight, and the requirements put upon us will certainly expand.”
One of the benefits of parametric insurance solutions, when compared with more traditional protection, is the ability to introduce a higher degree of customization; something panellists feel is vital when addressing climate change.
“This is where we feel very, very strongly. We feel very optimistic about our ability and the market’s ability to continue to help and address areas where the traditional market may have retreated, or may no longer be a participant in terms of a traditional product,” said Vetter.
According to Julian Roberts, Managing Director, Risk & Analytics, Willis Towers Watson, clients are more aware of the downside risks associated with their climate related exposure than some might imagine.
“The awareness, the profile that climate risk has at the moment is just so high. It is a climate emergency isn’t it, so it’s well understood,” he said.
However, he continued, “there’s a disconnect between that level of public awareness and the evaluation piece and all of that.”
Adding, “We’re finding our clients are coming to us for information and for evaluation, in any case. So, we’re soon, of course, going to be seeing higher climate disclosure obligations placed upon our clients, globally.
“But in any event, there is momentum here. Addressing the subject head on rather than perhaps sort of just waiting until something happens. There is, of course, ambulance chasing which is not something we like to do, in other words something terrible has happened, and then picking up the pieces.
“But, I think, in the moment of sensitivity when things are about to happen, or have happened, then that’s a very good moment to start bringing this to our clients attention.”