Swiss Re Corporate Solutions, the large commercial risk specialist unit of the global reinsurance firm, has already settled one parametric insurance claim, after a clients parametric trigger was breached by hurricane Ida’s wind speeds.
With hurricane Ida making landfall at Category 4 strength, with sustained winds recorded on the ground at close to 150 mph, any exposed parametric risk transfer, insurance and reinsurance, products were always likely to respond.
This is the first we’ve heard of, although we understand there are likely to be others.
Martin Hotz, Head of Parametric Nat Cat at Swiss Re Corporate Solutions explained that, “Last week, Hurricane Ida ravaged the United States. This week, Swiss Re Corporate Solutions already settled a claim based on our parametric STORM product.”
In a conversation with Artemis, Hotz further explained that this was a partial payout of a parametric insurance contract that was triggered by hurricane Ida’s wind speeds at a defined location where protection had been purchased.
While a smaller claim, because of the partial nature of the payout, it provides another good example of a protection buyer receiving an insurance payout rapidly after a major land-falling hurricane, with the payout made in between one and two weeks after the hurricane struck.
The Louisiana coastal region is home to a significant amount of economic activity from the energy sector, as well as some other industries and parts of the hospitality segment, all of which are relevant buyers of parametric products. We don’t know exactly what sector this payout flowed to.
Hotz also said that 2021 is turning into a relatively busy year for parametric payouts.
“In 2021, we paid claims from parametric Earthquake, Tropical Cyclone and Hail policies within days of the event,” adding that Swiss Re Corporate Solutions also paid parametric claims for the same perils in 2020.
“Parametric insurance is fast, transparent and flexible. It works,” he stated.
The use of parametric triggers in insurance and reinsurance risk transfer continues to expand and the utility of the parametric trigger becomes clearer with every improvement to the technology and payout made.
As data becomes increasingly abundant and available, sensors become ubiquitous in our lives and built-environment, plus the insurance and reinsurance market places a growing emphasis on advanced technology, we expect parametric triggers will become ever more accurate and responsive, providing valuable protection against a widening range of natural catastrophe perils and other exposures.