Parametric Hurricane Insurance: Tailored Solutions For Corporates

Parametric hurricane insurance offers an array of risk transfer benefits – meaning quick indemnification and greater transparency to face hurricane season.

Year after year, hurricanes remain as one of the costliest natural disasters.  Around the world, economic loss due to major hurricanes continues to be one of the most devasting perils on record since the start of the 21st century. Among the 363 weather disasters exceeding a billion dollars in damages since 1980 (as of August 2023) in the United States, hurricanes have accounted for over $1.3 trillion in total damages. On average, each of these events has incurred costs of approximately $22.8 billion. 

Corporates and public entities exposed to hurricanes encounter significant expenses in the aftermath of these storms that range from damage related expenses to non-damage related, such as business interruption that causes revenue loss. Many of these costs remain unaddressed by conventional insurance policies, resulting in coverage gaps or uninsured losses. As the frequency of insured losses continues to rise, often leaving approximately half of the losses uncovered, there is mounting pressure on both prices and capacities within the traditional insurance market

The impact of hurricanes

Hurricanes are hugely destructive weather events that produce rainfall–induced floods, storm surges, strong winds, and even tornadoes. In the United States, the Atlantic hurricane season is one of the main coastal areas where hurricane activity occurs and causes highest financial losses, resulting from mostly wind damage, as well as economic loss from the business interruption that occurs as a result of major hurricanes. 

Perhaps more than any other peril, hurricanes have the capacity to inflict damages totaling hundreds of billions of dollars within a matter of days. Just 2 years ago, Hurricane Ian struck Florida at Category 4 intensity resulting in over 112 billion in damages, marking it as the costliest hurricane in Florida’s history and the third-costliest in United States history. Such events highlight the threat potential of a single hurricane hitting densely populated coastal areas. 

Traditional insurance challenges and the emergence of innovative solutions 

The rising sum of insured losses due to tropical cyclones and hurricanes around the world is putting increased pressure on prices, deductibles, and capacities available within traditional insurance. As budgets and market capacity tightens due to continued global hardening, pressure is mounting on corporate business and public sector clients to spend premium dollars as effectively as possible. New innovative risk transfer solutions, such as parametric insurance policies, are desperately needed to fill the widening coverage gap in vulnerable regions around the world.

The benefits of parametric insurance

Parametric insurance coverage has emerged to offer access to new sources of capacity worldwide, delivering prompt payouts when companies need it the most. Through extensive use of data for pricing, parametric hurricane insurance can radically simplify storm insurance, eliminating embedded costs and reducing the amount of time required to quote and bind a policy. Claims settlement is agreed in advance which allows for rapid disbursement of cash to businesses and communities facing insolvency in the wake of extreme weather events. This immediate infusion of capital helps prevent lasting economic impacts.

Descartes Parametric hurricane solutions

Descartes offers two parametric hurricane solutions, designed and structured as “Cat-in-a circle” or “Wind speed at location”, leveraging the latest scientific research to assess hurricane exposure and design bespoke covers for our clients. Find parametric protection ahead of hurricane season – Descartes’ parametric insurance offers protection against both property damage and loss of revenue to business interruption following a named storm.

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