The severity & complexity of wildfires across the Asia-Pacific region have led to:
Limited capacity due to no cover for NDBI that wildfires cause
Loss of valuable supply, including carbon credit inventories
Property damage and material losses within direct combustion zone
Key benefits
Fresh capacity:
Parametric provides capacity to an increasingly retreating market
Customized protection:
Forests in wildfire-prone areas can receive a bespoke structure, even according to their tree value.
Transparency:
Loss detection is powered by satellite imagery, enabling better accuracy than traditional on-site assessment.
Timely claims payment:
On-site satellite monitoring & location data permit for real-time claims assessment & quick payout following a triggering event.
As Australia and New Zealand continue to face wildfire risk, Timber Investment Management Organizations (TIMOs) issuing carbon credits are left incompletely insured by the traditional market
Amidst climate volatility, forest fires have become a major concern on nearly every continent. In 2022, this phenomenon struck particularly hard in the USA, France, Morocco, Russia, Chile, China, and Australia. Though the Bureau of Meteorology (BOM) points to a weakening of La Niña, there are also signs of an emerging El Niño. The impacts of El Niño are particularly concerning as it causes hotter, drier weather across most of the region, heightening the risk of wildfire.
The summer bushfires of 2019-2020 were particularly violent, costing Australian agriculture between A$4 billion and A$5 billion, including $1.3 billion in insured claims. However, many timber companies issuing carbon credits were left uninsured. What’s more, in the case of a bushfire, the loss of timber value is only covered by traditional insurance. However, the financial loss of carbon credits or the replacement value of timber is not.
Descartes’ parametric insurance uses predefined triggers to accurately measure potential financial losses from bushfire driven carbon credit inventory impacts, as well as reforestation costs. This tailor-made, data-driven coverage ensures transparency and reliability, as the client has peace of mind they will receive their payment following a wildfire event.
case study example
Learn how a TIMO client could use a parametric cover to secure their forest plantation:
As wildfire risk continues to evolve, a TIMO client in North Sumatra, Indonesia struggled to find sufficient capacity in the traditional market. Their plantation generates a significant volume of carbon credits; therefore, carbon credit inventory protection is a priority
Problem
The client had suffered major losses in previous years and with ignition conditions worsen across the region, they feared losing their carbon credit inventory all together. This exposure represented a fully-uncovered financial loss by their traditional commercial cover.
Solution
A parametric wildfire product would secure their carbon credit inventory against all forms of physical and financial loss that result from a triggering wildfire. The policy would be customized to the clients' precise exposures & needs, with an agreed upon value per hectare up front. By utilizing satellite imagery to detect burnt areas and fire severity accurately, the client's assets would be transparently covered, with full certainty of their indemnification amount.
Result
In the case of a wildfire burning 10K acres out of an insured area of 50K acres, with the value per acre at 1K USD = the client would receive 10M USD. If the hectares of burnt area and consequential losses exceed an agreed upon deductible, we pay up to the limit.
