Technology is undoubtedly the growth driver for parametric risk transfer, said David Whitehead, co-CEO of Speedwell Weather, recently in a webcast with sister publication Artemis.
Last week, Artemis Live series of interviews and webcasts with executives and experts across the reinsurance and insurance-linked securities (ILS) space, in partnership with the Weather Risk Management Association, hosted a webcast on parametric insurance supported by our kind sponsor Descartes Underwriting.
Titled, The power of parametric solutions for climate resiliencePanellists examined the past, present and future of parametric risk transfer as acceptance for this type of coverage continues to grow.
Parametric insurance differs from traditional protection in that it offers faster payouts after an event, as the cover is designed to be triggered as soon as predetermined parameters are met, e.g. B. a fixed amount of precipitation at a certain location.
There was a discussion about whether the industry is likely to see a growing supply and more targeted solutions for parametric insurance, and Whitehead explained the importance of technology and data.
“Without a doubt, technology is driving this market,” said Whitehead. “Everyone keeps mentioning data, and simply because that’s the basis of this market, because without data, there would be no parametric marketing.
“If you look back almost 25 years ago when these markets started, it was primarily a market with around 10 locations worldwide … and that made sense, that was the data that was available to the market, and the market was mostly made up of Energy traders. “
In the past, a limited amount of surface data available resulted in increased base risk (the risk that the index measurements would not match an insured’s actual losses) between locations where, according to Whitehead, the expansion of surface data became the first round technological innovation in the market.
He also noted that while data has always been monitored by governments, it has not been used particularly proactively. Surface data is now available at hundreds of thousands of locations thanks to companies like Speedwell who went to great lengths to source, cleanse, and present this data to the marketplace.
And as Whitehead told the audience, “More websites mean less basic risk to weather.”
In addition, Whitehead highlighted the introduction of raster data sets (remote sensing) as another round of innovation in the field of parametrics. In theory, you can use it to sign a weather contract anywhere in the world.