The Parametric Post - Issue 72
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Thought for the day… Hurricane Beryl tests parametric insurance
The 2024 hurricane season has started with a bang.
Hurricane Beryl, which made landfall in the US in Texas on 8 July, is the earliest Category 5 hurricane ever recorded in the Atlantic. It’s been hammering wind speed recorders and smashed up property as it rolled through the Caribbean and there is nothing quite like a real event to test the efficacy and efficiency of parametric cover.
Beryl had reduced to Category 1 and landed in an area of low population so damage is very limited on the US mainland, but reports of damage elsewhere are a reminder of how devastating a major hurricane can be. Approximately 90% of houses were severely damaged or destroyed across Union Island in Saint Vincent and the Grenadines. In Barbados, 74% of the population has been affected. Damage included loss of roofs and significant impacts on the fishing industry, with many boats damaged or sunk. The eye of the storm bypassed Jamaica but 130mph winds have caused widespread power outages affecting hundreds of thousands of residences.
It doesn’t look as though the storm was severe enough to trigger Jamaica’s $150 million USD parametric catastrophe bond transaction, but Artemis.bm reports that its sources say that “the parametric tropical cyclone insurance coverage provided to some of the islands of Grenada, St Vincent and the Grenadines by the CCRIF SPC (formerly known as the Caribbean Catastrophe Risk Insurance Facility) is likely to be triggered”. There may also be losses to parametric cover taken out by the owners of large commercial facilities and resorts.
Finally, if you are interested in the before and after of Beryl as it passed through Carriacou last week, take a look at these videos from Jonathan Petramala who was on the ground.
In the news…
Latin America • Rainfall • Agriculture
Insurer Allianz has rolled out a parametric insurance product to protect Colombian farmers from climate-induced risks to their avocado and coffee crops. The solution uses satellite data to trigger payouts based on rainfall. So far, the initiative has safeguarded over $1.5 million USD of farmers’ investments, covering more than 390 hectares. Developed in collaboration with Bancolombia and SFA Cebar, the product also provides tied loans. Over 1,000 families have already benefited, with plans to expand coverage to additional regions and crops in Latin America.
Mexico • Cyclone
The Mexican state of Quintana Roo has renewed its parametric tropical cyclone coverage through the Natural Disaster Fund (NDF). Global Parametrics, part of the CelsiusPro Group, has enabled the renewal with risk capacity supported by Hannover Re. The coverage is designed to fund emergency expenditures and early reconstruction of critical infrastructure such as highways, water supplies, health services and schools following a tropical cyclone.
US • Flood
Munich Re’s Specialty division is supporting MGA FloodFlash in extending its sensor-enabled parametric flood insurance across all mainland US locations.
NormanMax introduces parametric retrocession product
Reinsurance • Hurricane • Typhoon
NormanMax Insurance Holdings has launched a parametric retrocession product underwritten through its Lloyd’s syndicate 3939 to provide cover for hurricanes and typhoons. NormanMax recently acquired New Paradigm Underwriters.
IBISA secures $3m to expand offering in Asia and Africa
Asia • Africa • Weather
Climate insurtech IBISA has closed a $3 million USD funding round to extend its parametric insurance solutions in Asia and Africa. This investment, led by The Acumen Resilient Agriculture Fund and Equator with participation from Asian Development Bank Ventures and other investors, aims to offer access to insurance for weather-related risks.
Parametric insurance aids women in India during heatwaves
India • Temperature
In Ahmedabad, India, an insurance programme has enabled 46,000 women to avoid hazardous labour during severe heatwaves by providing financial aid when temperatures exceeded 43°C (109°F). This parametric scheme, managed by the Self-Employed Women’s Association and supported by ICICI Lombard, ensures participants do not lose income during critical periods. The programme has distributed $340,000 USD across 22 districts, helping cover essential expenses like food and medication.
CCRIF issues $6.4m payout to Guatemala
Guatemala • Rainfall • Cyclone
The Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC), which provides parametric catastrophe coverage to governments and public utilities in the Caribbean and Central America, has made a payment of $6.4 million USD to the Government of Guatemala under its excess rainfall policy following significant rainfall from 13th to 19th June 2024, coinciding with the development of Tropical Cyclone Beryl.
Puerto Rico secures $282m in parametric coverage
US • Catastrophe bond
Puerto Rico’s Fiscal Agency and Financial Advisory Authority has obtained $282 million USD in parametric disaster insurance coverage, incorporating an $85 million USD catastrophe bond. The multi-year catastrophe bond, together with other financial strategies, brings Puerto Rico’s total disaster financial preparedness to $1.3 billion USD, enhancing its resilience against natural catastrophes such as storms and earthquakes.
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ARC pays $9.98m to Zambia for drought relief
Africa • Drought • Agriculture
The African Risk Capacity (ARC) Group has disbursed $10 million USD to Zambia following severe drought conditions that impacted the 2023/2024 agricultural season. This payout is aimed at aiding recovery from food insecurity and livelihood loss for over 3.5 million affected individuals.
Hannover Re achieves $140m in retro catastrophe bond upsize
North America • Catastrophe bond • Hurricane
Hannover Re has increased its retrocessional coverage through the 3264 Re Ltd. (Series 2024-1) catastrophe bond, reaching a target of $140 million USD. This third issuance by 3264 Re Ltd. covers northeast US and Gulf of Mexico storm risks. The bond, split into two tranches, offers coverage on a per-occurrence basis using a weighted PCS industry-loss index trigger over three years.
Hipcamp introduces Weather Guarantee with Sensible Weather
US • Weather
Hipcamp has partnered with parametric insurance firm Sensible Weather to launch a Weather Guarantee for its campsite bookings. This feature allows campers to receive reimbursements for rain-affected trips and is available across over 120,000 US campsites. The guarantee is tailored to each booking’s specifics, including location and date.
Dutch government funds ARC to expand insurance in Africa
Africa • Climate
The African Risk Capacity Ltd. (ARC) has secured a $27 million USD donation from the Dutch government to offer climate resilience in Africa through parametric insurance. This funding, part of the Africa Disaster Risk Financing Programme (ADRiFi), supports financial responses to climate events based on predefined triggers, such as cyclone intensity or excessive rainfall.
World Nomads extends travel offering with SmartDelay
UK • Ireland • Travel
Insurance provider World Nomads, in partnership with Collinson, has launched an Annual Multi-Trip (AMT) product in the UK and Ireland featuring the parametric service SmartDelay. This service automatically provides airport lounge access to travellers experiencing delays over 90 minutes. The AMT product, aimed at frequent and adventurous travellers, also includes traditional coverage offerings for trip interruptions, medical issues and adventure sports.
ISF boosts climate resilience in West Africa and India
Africa • India • Climate
The InsuResilience Solutions Fund (ISF) is enhancing climate resilience in Côte d’Ivoire and Nagaland, India through parametric insurance initiatives. In Côte d’Ivoire alongside partners such as ARC and FUSCOP, ISF is developing a hybrid insurance product for 125,000 rice producers to mitigate the effects of climate adversities such as droughts and floods. In Nagaland, ISF continues its support with additional premium subsidies for a climate risk insurance solution that protects against excess rainfall and other climate impacts. This ongoing support aims to fortify Nagaland’s disaster response capabilities, building on the success of an initial parametric insurance scheme launched in collaboration with Tata AIG General Insurance.
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