Slide 1: How parametric re/insurance can support the development of insurability
How parametric re/insurance can support the development of insurability Vincent FOUCART, Deputy CEO P&C Partners in charge of Alternative Solutions and Technical Developments, SCOR Global P&C
Slide 2: Agenda
Agenda Intro into Parametrics Case Studies Towards the new frontier of parametrics 2
Slide 3: Background and motivation
Background and motivation Protection Gap Corporate risk landscape evolving Rise of Digital and Internet of Things INSURANCE • Business Interruption top by 42% • Nr of connected devices grew by 31% • 90%+ of Emerging Asia cat losses MARKET uninsured risk managers 6th consecutive year to 8.4bil from 2
Slide 4: What is parametric?
What is parametric? World Bank: Index, or parametric, insurance pays out benefits based on a pre-determined index for the loss of assets and investments as a result of weather or other catastrophic events. In contrast, traditional insurance relies on assessments of the actual damage. SCOR: Insur
Slide 5: Parametric market by buyer & peril
Parametric market by buyer & peril Individuals SME Corporates Insurers Governments Supranationals Index based yield/revenue products, price risk Agriculture components Revenue protection Reinsurance Retail Energy companies, /hedging( of Weather (High frequency) weather energy cost hedging, original
Slide 6: Basis risk management is key for the efficiency of parametric solutions
Basis risk management is key for the efficiency of parametric solutions Basis risk Optimization Basis risk = difference between the parametric payment and the ultimate Basis risk reduction algorithms are essential to the relevance losses of the covered portfolio of the solution for the (re)insur
Slide 7: Agenda
Agenda Intro into Parametrics Case Studies • Support for Innovative Power Technologies • Support for Economy in Disruptive Regions • Collaboration with Governments and Supranationals Towards the new frontier of parametrics 7
Slide 8: Parametric solutions for corporate clients
Parametric solutions for corporate clients Sector Risk factor Consequences Rainfall, Temperature, Energy demand by consumers Energy Wind, Sunshine Production capacity Agriculture Rainfall, Temperature Impact on yields Work interruption Construction Temperature, Wind Extra costs and late penalties Sp
Slide 9: Case study: Revenue shortfall protection for hydro power generation
Case study: Revenue shortfall protection for hydro power generation Client profile Turnover from hydro generation dropped by over 2/3 following a catastrophically dry year. Power prices did not compensate the shortfall. Client interested in limiting similar impact in the future and willing to cons
Slide 10: Case study: Combining traditional and parametric coverage for Solar Park
Case study: Combining traditional and parametric coverage for Solar Park Client profile Investor into a 100MW solar park wants to protect its cashflows against the impact of standard property damage, consequential loss, but also lack of solar irradiation loss. SCOR solution Combine traditional cov
Slide 11: Case study: Cat protection for T&D Lines provides budgeting certainty
Case study: Cat protection for T&D Lines provides budgeting certainty Client profile Transmission & Distribution network in the Philippines exploring alternative ways of buying a cover for its Wind and Quake cover. Parametric approach preferred as T&D traditionally considered uninsurable with unpr
Slide 12: Case study: Solar Power Plant Cover Against Lack of Rainfall
Case study: Solar Power Plant Cover Against Lack of Rainfall Client Proposition • A solar power plant requires water to cool down its innovative mechanism and engines Probability Measure Payout • It faces the paradox not to be able to operate following long-term drought • Empty water reservoir hinde
Slide 13: Case study: Attendance Shortfall at Water Park due to Rain
Case study: Attendance Shortfall at Water Park due to Rain Client Proposition A worldwide operator of Entertainment Parks reports a volatile attendance profile on a Water Park in recent years. They want to protect their revenues from fluctuation due to shortfall caused by frequent rain. 1940 1950 19
Slide 14: Wild Fire Parametric Cover of Forestry
Wild Fire Parametric Cover of Forestry Support to the local economy in sensitive regions Client Proposition • Forest exploitations suffer from wild fires • Wide-spread plantations display diverse ages and species at locations • Delays in liquidation and disputes over volume or salvage levels create
Slide 15: Case study: Multiple-Trigger Coverage for Volcanic Eruption
Case study: Multiple-Trigger Coverage for Volcanic Eruption Example of support to the local economy in disruptive regions Client Proposition • Volcanic regions are also centres of intense economic activities - Some volcanoes shelter tourism like Mounts Fuji, Bandai and Zao - Mount Sakurajima hosts t
Slide 16: Case Study: Parametric earthquake reinsurance in Taiwan
Case Study: Parametric earthquake reinsurance in Taiwan Client: Insurance Company, Taiwan Territory: Taiwan Form: QS reinsurance of a parametric EQ product, targeted at SME, residential Trigger: • Earthquake M>=7.0 in Taiwan • Payout decreasing function of distance to epicenter 16
Slide 17: Case Study: Large Cities coverage
Case Study: Large Cities coverage Client/Reinsured: Chinese insurance company Original Insured: City governmental bodies in Guangdong province Form: QS reinsurance of underlying product Term: 3 years Trigger/Coverage example for 1 city Typhoon: max 2min average windspeed in a 90km circle 250,000,0
Slide 18: Philippines Parametric Cover based on Post-event Emergency Loss
Philippines Parametric Cover based on Post-event Emergency Loss Example of collaboration with government and supranational entities Risk • Philippines regularly swayed SCOR solution by natural catastrophes like Wide-spread coverage, covering 25 provinces typhoon, earthquake, flood most impacted by
Slide 19: CCRIF Parametric Protection
CCRIF Parametric Protection 2017 Hurricanes • Hurricanes Irma and then Maria triggered the cover in 2017. • CCRIF (Caribbean Catastrophe Risk Insurance Facility) is a «pool» Hurricanes Irma and 50+ millions USD have been paid sponsored by 20 Caribbean and Central American Governments then Maria
Slide 20: Mexican FONDEN Parametric Protection
Mexican FONDEN Parametric Protection FONDEN Latest issuance • FONDEN (Natural Disasters Fund), Mexico's fund for natural disasters, • IBRD / FONDEN 2017 multi-peril cat bond issued in August 2017 established in the late 1990s to support the rapid rehabilitation of federal and state infrastructure af
Slide 21: Agenda
Agenda Intro into Parametrics Case Studies Towards the new frontier of parametrics 21
Slide 22: Towards the new frontier of parametric insurance
Towards the new frontier of parametric insurance Emerging trends: Weather-linked protections developing • Parametric insurance solutions • Parametric covers for other perils, based for corporate needs, for individuals on advanced modelling and synthetic triggers insurers and - e.g. Individual trip c