Supporting Renewable Energy Projects Against Earthquake Risk

Our parametric covers offer an alternative solution

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Earthquake risk has no seasonality, on-going seismic exposure has led to the renewable sector experiencing:

Traditional insurers increasing deductibles, reducing coverage or excluding it altogether

Clients forced to pay significant additional project costs due to Nat-Cat damage/delays on projects

Premium rate hikes when market conditions harden, making securing project financing near impossible

Aerial view of a seismic activity

Key benefits

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Fresh capacity:

Parametric products offer an alternative risk transfer solution to un-insured risks

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Customised protection:

Flexible and straight-forward structure tailored to clients needs

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Transparency:

Certainty of indemnification with pre-agreed thresholds & payout amounts

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Timely claims payment:

Near real-time monitoring of seismic activity permits for quick payout following a triggering event. Allowing clients the flexibility to allocate funds towards repair costs that help speed up the return to full-operation

case study example

Earthquake risk for property assets

Learn how a hydroelectric power station in Nepal could secure their project financing despite being in an Earthquake-prone area:

Problem

On April 25, 2015, a 7.8 magnitude earthquake in Nepal impacted the progress of a hydroelectric project, making traditional insurers reluctant to provide coverage for earthquakes in the dam's remote location. This lack of coverage also negatively affected the project's investment potential. The investors & sponsors had no other choice but to look for alternative insurance to secure the project's financing.

Solution

With our parametric earthquake cover, payout would have been triggered when the earthquake has reached a certain intensity/ground acceleration. The client would have received a quick payout following the event, enabling construction to resume rapidly.

Result

If covered at the time of the 2015 quake, our PGA-based structure (peak ground acceleration) would have made the client eligible to receive the full payout of $185M (the sum insured) as the ground acceleration reached 0.57g at the insured site.

payout structure
Map displaying a seismic hazard analysis for Nepal

Client testimony

The deployment of a second-generation parametric risk transfer solution backed by Descartes has allowed the financing for a power plant to proceed even when traditional insurance for Earthquake became unavailable. The strong technical expertise and solutionfocused approach by Descartes is very much
appreciated.

Senior Insurance Officer,
International Finance Corporation, World Bank Group

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