Parametric Insurance against excess precipitation & other climate risks: an innovative solution for the construction industry

Parametric Insurance against excess precipitation & other climate risks: an innovative solution for the construction industry

Adverse weather affects 45% of construction projects globally, resulting in billions of dollars in additional expenses and lost revenue. These impacts come both as direct and contingent business interruption losses, often uncovered by traditional policies. 

From extreme temperatures to excess wind or rain, adverse weather increasingly disrupts well-planned processes and timelines, representing the leading cause of construction project delays, and subsequent penalty and financing costs. 2022 saw extreme rainfall trigger floods that inundated cities and projects in Australia, China, the United Kingdom, and most recently California, where total economic losses from flooding are estimated to be between USD 5-7 million USD. 

The construction industry tends to take the full brunt of adverse weather conditions, as projects operate year round. Work suspension, project delays and damaged equipment all force contractors to pay hefty additional project costs. As abnormal weather conditions heighten the pressure on construction companies, comprehensive coverage for weather-driven project delays doesn’t exist in the traditional market.

Parametric risk transfer solutions offer access to new sources of capacity globally.  These bespoke and customizable covers provide an alternative to credit facilities following delays or damages and deliver transparent terms and prompt payouts when contractors need them most. Descartes’ parametric insurance for perils such as excess precipitation offer swift liquidity and are structured to directly meet the  client’s needs, budget, risk appetite, and asset location(s). With a parametric cover in place, contractors can hedge delayed start-up impacts and benefit their bid by tangibly derisking exposure for the developer.

Protecting ongoing projects amidst weather & climate uncertainty – Descartes’ parametric insurance offers financial protection against adverse weather.

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