Parametric Earthquake Insurance: How a Mexican Resort Secured Full Coverage After a Major Quake

Key Challenges for the Region

Operational Delays: Earthquake events often cause extended disruptions in business operations, leading to a halt in services and a long recovery period.

Limited Insurance Capacity: Traditional earthquake insurance may not provide sufficient coverage to fully address the cost of property damage, business interruptions, and other financial setbacks.

Slow Claims Processes: The claims process with traditional insurers is often prolonged, sometimes taking months before businesses can access their indemnity.

Key benefits of parametric insurance

Added Transparency

With pre-agreed parameters and payout structures eliminating ambiguity

Bespoke Policies

Custom covers for one or multiple locations adapted to the client’s existing coverage (e.g., traditional insurance, captive)

Swift Payouts

In a matter of days or weeks after a loss event, no longer requiring on-site loss assessment

Financial Freedom

Covering any type of direct or indirect financial losses resulting from the event

Unpredictable and sudden, earthquakes can cause immediate devastation. Without adequate coverage, companies may find it difficult to recover quickly.

Descartes’ Parametric Earthquake Insurance: A Magnitude-Based Approach

Descartes' Parametric Cat-in-a-Circle Insurance is a Magnitude-based solution that takes into account the earthquake's Magnitude and the distance from the insured location(s). This simple yet effective product monitors earthquake events within one or more insured areas, factoring in both direct and indirect financial losses that may arise from an earthquake.

case study example

Parametric Cat-in-a-Circle Solution for Mexico

On September 7th, 2021, a Magnitude 7 earthquake struck the city of Acapulco, Mexico, causing thousands of reports of property damage, especially for those in the hospitality industry.

Problem

A resort in Acapulco was ~17km from the 2021 earthquake’s epicenter, making their physical and financial assets vulnerable. After experiencing significant property damage and business interruptions, such as a loss of attraction and a halt in operations, along with other non-damage financial impacts from the 2021 earthquake, the company realized their traditional insurance cover didn’t have adequate capacity to ensure a full recovery.

Solution

With Descartes’ Cat-in-a-Circle cover, the company would be certain that they would receive a rapid payout following an earthquake, covering tangible and intangible losses and ultimately protecting their assets.