Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Swiss Re and HWind Scientific collaborate on parametric re/insurance


Swiss Re, one of the world’s largest reinsurance firms, is partnering with HWind Scientific, LLC, a provider of real-time, objective, observation-based hurricane data, in an initiative to develop a new category of parametric re/insurance products.

The need for rapid payouts after major catastrophe events strike has been underscored in recent years, with the use of parametric triggers and weather indices providing valuable disaster risk transfer and financing tools across the developing and developed world.

This has led to an increased focus on the use of parametric triggers within insurance and reinsurance products, as tools that can be used to provide additional layers of protection that respond quickly when disaster strikes and the impact looks likely to cause financial difficulty.

In response to the growing interest in parametric products, Swiss Re has signed a multi-year partnership with HWind Scientific, LLC on an initiative that will see HWind’s real-time hurricane wind analysis capabilities integrated with Swiss Re’s parametric insurance solutions.

HWind Scientific’s output is based on technology originally developed in NOAA’s Hurricane Research Division by Dr. Mark Powell, who left NOAA last year to launch the company. Powell pioneered a methodology using standardisation and analysis to bring together diverse sets of observing platforms in order to produce a coherent map of a hurricane’s wind field in real-time.

“We are excited to be working with Swiss Re on a new category of parametric insurance products,” commented Powell. “Swiss Re is a global leader in the reinsurance industry and has a proven track record in designing transactions that help cedants solve their catastrophe response needs.”

Powell said that the collaboration between HWind and Swiss Re is “a natural partnership that combines the expertise of atmospheric scientists and insurance specialists to develop innovative and customized weather risk solutions.”

“Financial preparedness is key to effective disaster risk management,” added Alex Kaplan, Swiss Re. “Speedy payouts are critical after a disaster, not just to help governments save lives through relief efforts, but to reinstate critical infrastructure, housing and kick start business and the economy again. Our partnership with HWind can make a big difference to ensuring that disaster funds become immediately available when and where they are most needed.”

This is where parametric products fit so well into risk transfer, insurance and reinsurance programmes. As a highly responsive layer of protection that is increasingly appropriate for companies, insurers, reinsurers as well as governments, sovereign entities and risk pooling initiatives.

In fact parametric insurance protection will no doubt be made available directly to homeowners as well in the future, it’s certainly suited to their needs in catastrophe prone regions of the world and as technology development accelerates and continues to be adopted by insurers and reinsurers it is surely only a matter of time before more of the world’s re/insurance policies are based on parametric triggers.

The project is focused on U.S. hurricane and tropical storm risks to begin with. At the moment it seems to target insurance or reinsurance covers, but the resulting trigger technology could be put to use in a catastrophe bond trigger in future, we’d imagine.

HWind Scientific explains more about the use of its technologies in parametric insurance or reinsurance solutions:

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The need for expedited claim settlement and rapid payout following a major tropical cyclone disaster has led to a prominent rise in parametric insurance solutions within the insurance industry. When parametric triggers are geophysical quantities associated with a natural hazard, it is important to focus on geographical locations with dense observing networks and advanced technologies for understanding the magnitude and potential impact of the event.

For states along the U. S. Gulf of Mexico and Atlantic east coasts, leading-edge meteorological technologies allow for real-time mapping of hurricane wind impact areas. By taking advantage of resources such as the direct and remote sensing capabilities of surface observing stations, hurricane hunter reconnaissance aircraft, satellite platforms, buoys, ships, and Doppler radar, parametric weather risk solutions can be more accurately customized to fit a company’s business objectives.

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