Sargassum — Descartes

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The increasing occurrence of sargassum events on Caribbean beaches and throughout the Gulf of Mexico comes with significant financial impacts on the tourism, hospitality, recreation, and transport industries, as well as the public sector.

Without traditional coverage available, stakeholders absorb lost revenue and expenses related to algae removal, closure of sea activities, booking cancellations, and more.

Descartes’ parametric insurance solutions offer a new form of protection against sargassum events.

Customized precisely to the client’s exposure needs, we cover revenue loss due to sargassum bloom with a straight-forward, satellite based solution.

We collaborate with brokers to protect clients ranging from hotels to restaurants, fisheries, tourism activity providers, airports, and more, making them more resilient as the industry navigates these challenging times.

Our parametric approach to sargassum events

First we model and evaluate the client’s exposure to sargassum events in order to design a bespoke parametric cover that pays out when the concentration of sargassum in the water at selected shore locations exceeds a specific threshold.

Client’s have the flexibility to select the algae concentration threshold, timing, and length of the risk period based on their business needs and risk appetite.

During the policy period, we monitor their exposure in real-time using satellite imagery.

When the monthly concentration of sargassum exceeds the trigger, clients swiftly receive payment, helping them cover revenue loss from cancellations, closures, and algae removal costs.

Learn more about our technology

Parametric Insurance Case Study: Sargassum Impacts for Hotel

Client Need: An all-inclusive luxury resort on the Mexican Riviera has faced significant economic impacts due to the increased prevalence of sargassum inundation on the hotel’s private beach. During sargassum events, the client is forced to close beach access and cancel all beach front activities, comprising 30% of average weekly revenue during peak season. Removal from the 250m beach costs around $100K per event and requires specialized treatment and immediate attention due to the algae’s toxicity.

Pain Point: Factoring in the lost revenue from extensive booking cancellations by guests unwilling to spend their holidays without beach access, the client has absorbed 1.5M in financial loss during years with multiple sargassum events. With no way to mitigate this loss with an existing traditional insurance product, the hotel seeks an alternative solution.

Our Solution: A parametric cover against financial loss due to sargassum. Together with the client & their broker, we agree on the amount they will receive if satellite-detected sargassum concentration exceeds a certain threshold in the ocean just in front of their resort.

The Result: The exposure is monitored in real-time with a monthly payout if the concentration of sargassum triggers the policy. With the certainty of quick liquidity in the event of excess sargassum, the resort now has the means to more seamlessly pay for removal costs, refund clients, or invest in algae collecting nets.