Parametric Insurance Protects Project Financing in the Construction Sector
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Descartes is expanding its capabilities to another major emerging risk : cyber attacks
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2021-12-22
White Paper: Parametric Cyclone Cover
Tropical cyclones have been the costliest Nat Cat in terms of property damage and economic losses over the last two decades at the global scale
As global warming bolsters the risk of tropical cyclones and the market hardening, the need for tropical cyclone parametric insurance is becoming increasingly clear. Even in their initial stages of development, tropical cyclones pose a great hazard to life and property. Three hurricanes that occurred in 2017 alone, Hurricane Harvey, Irma, and Maria, caused insured losses totaling about $220 billion. Hurricane Michael in 2018 and Hurricane Ida in 2021 led to losses of about $25 billion and $95 billion respectively. These hurricanes have led to devastating effects, and are listed in the ‘Top 10 Costliest Hurricanes In The United States’.
Tropical cyclones are powerful circular storms that form over warm tropical oceans and bring torrential precipitation and winds that exceed the speed of 119 kilometers per hour (74mph). To develop, tropical cyclones require warm ocean temperatures, weak vertical wind shear, the presence of the Coriolis force, and a moist unstable atmosphere. Due to climate change, cyclones are expected to happen more frequently and cause more destructive damage, with flooding, winds, storm surge and tornadoes emerging as consequences. According to a 2021 OECD report, the amount of damage from a 1-in-250 year cyclone induced flooding event will increase significantly by 2050.
Even if the average cost of damages from cyclones has risen sharply, large parts of them are unlikely to be covered. For example, in 2020 alone, cyclone-driven economic loss reached approximately $78 billion worldwide. Of these $78 billion in losses, 68% ($53 billion) were not covered by insurance. Even in the more established North American market, 2021’s Hurricane Ida demonstrated the windstorm coverage gap. It led to an economic loss impact of an estimated $95 billion, yet only 32% ($30 billion) of losses were covered.
Tropical cyclone parametric insurance is an alternative solution to the widening protection gap of traditional insurance
While the risk of tropical cyclones is increasing, both corporates and governments are often not adequately protected against this risk. The rising sum of insured losses around the world is putting increased pressure on the costs and capacities available for corporate insurance programs. The insurance, which becomes increasingly restrictive due to market hardening, places more strain on corporate and public sector clients. In this regard, parametric insurance can play an important role as an innovative risk transfer solution by covering specific cyclone exposure and respecting the client’s budget.
Fill out the form to download our white paper on how tropical cyclone parametric insurance can build resilience for corporates and public entities and why it is a key solution in the hard insurance market.
Tropical cyclones have been the costliest Nat Cat in terms of property damage and economic losses over the last two decades at the global scale
As global warming bolsters the risk of tropical cyclones and the market hardening, the need for tropical cyclone parametric insurance is becoming increasingly clear. Even in their initial stages of development, tropical cyclones pose a great hazard to life and property. Three hurricanes that occurred in 2017 alone, Hurricane Harvey, Irma, and Maria, caused insured losses totaling about $220 billion. Hurricane Michael in 2018 and Hurricane Ida in 2021 led to losses of about $25 billion and $95 billion respectively. These hurricanes have led to devastating effects, and are listed in the ‘Top 10 Costliest Hurricanes In The United States’.
Tropical cyclones are powerful circular storms that form over warm tropical oceans and bring torrential precipitation and winds that exceed the speed of 119 kilometers per hour (74mph). To develop, tropical cyclones require warm ocean temperatures, weak vertical wind shear, the presence of the Coriolis force, and a moist unstable atmosphere. Due to climate change, cyclones are expected to happen more frequently and cause more destructive damage, with flooding, winds, storm surge and tornadoes emerging as consequences. According to a 2021 OECD report, the amount of damage from a 1-in-250 year cyclone induced flooding event will increase significantly by 2050.
Even if the average cost of damages from cyclones has risen sharply, large parts of them are unlikely to be covered. For example, in 2020 alone, cyclone-driven economic loss reached approximately $78 billion worldwide. Of these $78 billion in losses, 68% ($53 billion) were not covered by insurance. Even in the more established North American market, 2021’s Hurricane Ida demonstrated the windstorm coverage gap. It led to an economic loss impact of an estimated $95 billion, yet only 32% ($30 billion) of losses were covered.
Tropical cyclone parametric insurance is an alternative solution to the widening protection gap of traditional insurance
While the risk of tropical cyclones is increasing, both corporates and governments are often not adequately protected against this risk. The rising sum of insured losses around the world is putting increased pressure on the costs and capacities available for corporate insurance programs. The insurance, which becomes increasingly restrictive due to market hardening, places more strain on corporate and public sector clients. In this regard, parametric insurance can play an important role as an innovative risk transfer solution by covering specific cyclone exposure and respecting the client’s budget.
Fill out the form to download our white paper on how tropical cyclone parametric insurance can build resilience for corporates and public entities and why it is a key solution in the hard insurance market.
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