Changing precipitation patterns, along with shrinking glacial water storage, are leading to increased pressure on waterway navigability and industrial use, with recent events including Rhine in 2018 & 2021, Danube in 2019, Mississippi in 2020, and Seine in 2021.
Parametric river level insurance leverages official gauge measurements to protect companies with a straight-forward, data-based cover tailored to their river exposure.
Descartes’ parametric insurance is efficient for all river-dependent activities, in particular commodity traders, heavy industrial clients, or chemical plants.
Our parametric river level product is designed specifically to meet the client’s needs and budget.
We structure the solution to indemnify when river levels reach pre-agreed thresholds, as measured and monitored by river gauges or third-party sensor data.
Together with the client and their broker, we define the parameters and corresponding indemnity up front, calibrated to the client’s loss history and expected increased cost of transportation.
Real-time river level measurements are monitored and shared with the client, with quick, transparent payout when triggers are met.
Client Need: A commodity trader in Western Europe faced critical business interruption exposure when water levels on the Rhine surpassed or fell below the common river level range. Low or high river levels had halted ship transportation in previous years, including 2018 when an extended period of low water levels caused a 28M € impact on the company’s balance sheet and strained its reputation.
Pain Point: Market conditions around non-damage BI made it impossible to find a satisfactory BI policy in the traditional marketplace. The commodity trader was forced to absorb the costs of organizing alternative modes of transportation to meet procurement deadlines whenever river levels stopped ship traffic. They sought an alternative risk transfer solution that would insure liquidity in the event of low river levels.
Our Solution: A parametric river level cover that uses daily water level data from specific stations that have proven to be linked to transportation disruptions and losses for the client in the past. We designed the solution using daily measurements from these stations and established parametric water level thresholds to build a pre-agreed loss structure. Tailored to the client’s loss history and expected alternative transport costs, a precise payout structure depending on the water level at pre-agreed gauges was implemented
The Result: Indemnities are registered during the risk period for each day that Rhine levels exceed maximum or minimum river level thresholds, with losses paid out swiftly to the client. With this reliable and predictable parametric cover, the client would have received 30M € in 2018 for the 30 days during the risk period that water levels exceeded the threshold, matching the loss that they indicated for that year.