With an exponentially increasing number of data sources and ever-increasing data-quality, insurers have to seize the opportunity to define concrete measures to close the growing protection gap, e.g. by pursuing new ways to insure their customers’ intrinsic exposures.
A good example of these new data sources are the European Space Agency‘s Sentinel satellite missions which provide a number of earth observations at resolutions unheard of just a decade ago. The list of Sentinel derived products directly relevant to re/insurance is astounding but includes soil moisture, pollution monitoring, fire detection, land-use change mapping, ocean temperature monitoring and post event earthquake analysis.
Combining these new data-sources with other, more commonly used data (met-stations, historic portfolio losses), an insurance company can not only improve its portfolio management and risk selection, but additionally can give its clients loss prevention advice and bespoke insurance solutions. This is where Parametric Insurance comes into play.
By linking insurance policy payouts to an index-like structure based on data from independent sources, Parametric Insurance can greatly improve the transparency of the intrinsic risk covered by an insurance policy to the client. Compared to often lengthy loss-settlement procedures of indemnity-based insurance policies, Parametric Insurance pays the insured often within days after the loss-causing event, alleviating potential cash-flow concerns and enabling the client to focus on what matters most – continuing the business.
There are three main applications where parametric insurance can be a relevant alternative to traditional insurance solutions:
- New risks not currently covered in a traditional way
- Traditional risks where the post-event payouts are defined with subjective expert advice
- Traditional where the traditional product margins are too volatile for the insurance carrier
While agriculture, transportation and renewable energy sectors are the most established buyers of parametric products we are seeing great interest from many sectors that are attracted to the transparency and cash flow protection that this product line offers.
Generali is one of the few insurance carriers able to offer parametric protection on a global basis. Through its Global Corporate & Commercial Business Unit with its international network, the Group supports governments, supra-national institutions and companies in managing their risks more efficiently. Target segments include, but are not limited to Agriculture, Transportation, Construction, Event Organization and (Renewable) Energy. Within Italy, Generali offers parametric solutions in the Retail & SMEs segment, mainly with a successful product in the agriculture segment for crop protection. Generali Italia is currently developing pilot projects in other areas to strengthen our value proposition with new innovative parametric solutions. Stay tuned!