Why Parametric Earthquake Insurance Is a Strategic Solution for Businesses in Seismic Zones
In regions prone to seismic activity such as Turkey, Mexico, Chile, California, earthquake insurance is not just a necessity—it’s a strategic business decision. Traditional insurance models find it difficult to provide swift financial relief post-disaster, leaving businesses vulnerable during critical recovery periods.
Recent data highlights a troubling gap between the insured and full economic losses in seismic events. For instance, the 2023 Turkey and Syria earthquakes resulted in staggering economic damages totaling $92.4 billion, yet only $5.7 billion was covered by insurance. This discrepancy underscores the critical need for comprehensive coverage strategies that can mitigate financial vulnerabilities in the aftermath of major disasters.
Unlike conventional insurance that requires assessment of actual physical damage, parametric insurance triggers payouts based on predefined earthquake parameters, like the Peak Ground Acceleration measurement of an earthquake, ensuring clarity and speed in settlement. For businesses in sectors such as hospitality, real estate, manufacturing, and construction, this means immediate access to funds, facilitating quicker recovery and continuity of operations.
Why Choose Descartes’ Parametric Earthquake Insurance?
✔️ Customized Solutions: Flexible coverage designed to meet the unique needs of various industries and client specifications.
✔️ Swift Indemnification: With predefined parameters, compensation is quick and the typical post-disaster assessment delays are minimized, providing insured parties with the necessary liquidity to resume operations without delay.
✔️ Fresh Capacity: Provides excess capacity where traditional insurers fail to do so.
✔️ Financial Stability: Protects operations against the unpredictable nature of earthquakes, ensuring that when the ground shakes, finances remain rock solid.
How Parametric Insurance Works
Peak Ground Acceleration (PGA) is the measurement of the intensity of ground shaking during an earthquake. A payout is made when the PGA measurement at the insured location(s), as reported by the data provider, exceeds the predefined threshold in the payout structure, as agreed upon in the policy.
Download our product sheet (PDF) for more insights and an example of a payout scenario.
