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
Key benefits
Fresh capacity:
Parametric products offer an alternative risk transfer solution to un-insured risks
Customised protection:
Flexible and straight-forward structure tailored to clients needs
Transparency:
Certainty of indemnification with pre-agreed thresholds & payout amounts
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.
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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