At Miami Reinsurance Week, Parametric Risk Transfer Continues to Build Momentum
Miami Reinsurance Week has once again proven why it is one of the most prominent networking events in the Latin America re/insurance community calendar, with over 1,500 professionals gathering in Miami for an action-packed week of industry events and face-to-face meetings.
Miami is a major regional hub for Latin America and the Caribbean, with the week attracting a wide range of re/insurers, brokers and thought leaders to discuss key topics and trends that are shaping the industry, and a chance to consider the year ahead.
2024 proved to be a year of extremes for the region, ranging from devastating floods to severe droughts, high temperatures, wildfires, and an above-average Atlantic Basin Hurricane Season with 11 tropical storms, presenting challenges for the industry as it continues to grapple with the impact of climate change and address the protection gap.
During our discussions, we heard first-hand about the growth of parametric re/insurance – an alternative risk transfer mechanism that delivers pre-defined, rapid pay-outs based on transparent, objective data – and how it is being increasingly used by businesses, re/insurers and governments, seeking to access additional capacity, obtain wider coverage and further build resilience against natural catastrophe and weather events.
Technology and Data: The Catalysts for Parametric Growth
With an increased willingness amongst the industry to embrace recent technological advancements to optimize operational efficiencies, reduce response times and improve the customer experience, the convergence of technology and risk transfer has never been more relevant. This powerful combination unlocks new opportunities and maintains competitive advantage for participants in an evolving risk landscape.
ParameterPro, our tech solution for brokers, lies at the heart of this shift, combining award-winning technology with unparalleled data access, empowering brokers to structure, visualise and model parametric re/insurance natural catastrophe and climate solutions such as Hurricane and Earthquake. The availability of an extensive range of global climate and environmental datasets through a single platform further streamlines the process, enabling the creation of bespoke and relevant structures to support the evolving needs of re/insurance buyers.
The versatility and application of parametric solutions was highlighted frequently in our discussions with brokers and re/insurers, both in terms of enhancing coverage for individual risks with high-cat exposure on a facultative basis, as well as complementing traditional indemnity-based treaty reinsurance arrangements for portfolios and supporting placement efforts. As a line of business agnostic form of risk transfer, we welcome the opportunity to broaden the offering and support our partners in high demand product lines including but not limited to Property, Construction, Agriculture and Renewable Energy.
Parametric solutions are also increasingly underpinning the launch of new, innovative insurance products that are being offered at scale, widening access to insurance for traditional consumers as well as supporting communities that are overlooked and underserved.
Innovative Solutions for Agriculture and Beyond
With severe droughts being felt in several countries across the region in 2024, the vulnerability of the agricultural sector and the wider need to bolster food security have been brought sharply into focus. Identifying the limitations of basing parametric coverages on precipitation alone, our Water Balance Index provides a far more comprehensive view of moisture deficit by also considering potential evapotranspiration over a defined period.
This innovative approach provides clients with the ability to capture the financial impact to crop production during both drought and excess moisture periods throughout the crop cycle. It is supporting cooperatives, farmers and even financial institutions lending to the agricultural sector, allowing insurers to not only address the evolving needs of their clients but to also support and further engage with their respective communities.
Equally important is the role of committed risk capacity. Our Global Parametrics team mobilizes dedicated risk capital through the Natural Disaster Fund and other vehicles to not only support the scalability of new parametric re/insurance products but also strengthen overall market resilience, particularly in regions with high exposure to natural catastrophe and extreme weather events such as Latin America and the Caribbean.
The resilience, entrepreneurial spirit and dedication of the clients and partners we met was exemplary as they continue to lead the way in widening the adoption of parametric re/insurance in this dynamic region.
Throughout Miami Reinsurance Week, discussions underscored that the future of re/insurance depends on integrating technological advances with robust risk capacity. Let's shape the future of risk transfer together as we strive towards making re/insurance more inclusive, transparent and responsive to the needs of those who depend on it the most.
Harry Titherley is Business Development Director at Global Parametrics, a CelsiusPro Group company.