27
Parametric Insurance Solutions Presentation for Swiss Re Tour de Raison in Warsaw 2019 Gianni Biason, Head Property & Specialty Solutions
Parametric Insurance SolutionsPresentation for Swiss Re Tour de Raison in Warsaw 2019
Gianni Biason, Head Property & Specialty Solutions
Agenda
21/10/2019 2
1. The challenge: Protection gap
2. Our solution: Parametric insurance
3. Our offering
4. Lessons learnt
5. Case studies
Protection Gap
3
21/10/2019 4
In 2018, a majority of catastrophe losses remained uninsured…
2011
50%or USD 80bn out of the total USD 165bn economic losses in 2018 due to catastrophe were
uninsured
= USD 80bn total global GAP in
protection from catastrophes…
34%uninsured
81USD bn
economic losses
21USD bn
economic losses
63%uninsured
0
55USD bn
economic losses
63%uninsured
1USD bn
economic losses
88%uninsured
2USD bn
economic losses
30%uninsured1
5USD bn
economic losses
73%uninsured
Insured vs. uninsured losses (1970-2018, in USD billion at 2018 prices)
… and the global gap in coverages from catastrophes continues to widen.
21/10/2019 5
4.7%
5.0%
Growth in ECONOMIC losses
(10 yr rolling average)
Growth in INSURED losses
(10 yr rolling average) ECONOMIC loss (10-year moving average)
INSURED loss (10-year moving average)
-
50
100
150
200
250
300
350
400
450
500
Insured losses
Uninsured losses
10-year moving average insured losses
10-year moving average total economic losses 70%
UNINSURED economic losses caused by natural catastrophes
in the past decade
Parametric Solutions
6
21/10/2019 7
Parametric InsuranceSettles on pre-agreed, simple measure ("parameter" or "index")
Pays out of pre-defined amount whentriggering event occurs
Parametric insurance covers many perils
8
Earthquake Tropical cyclone / Wind
Life & HealthWeather risks in renewables
Drought (Agriculture) Flight delay
Business interruption
21/10/2019 9
How parametric insurance works
automated claimspayment
Product Design
Pre-inception On-risk Post-loss
constant monitoring of index
Hazard intensity
PremiumPotential payout
21/10/2019 10
Fast, flexible and affordable insuranceValue proposition parametric insurance
Fast access to cash & flexible usage
Transparent & simple product
Customizable product
What is parametric insurance best used for?
• As emergency cash relief which is payed out immediately
• When traditional insurance is not accessible or affordable
• As complement to traditional insurance
Swiss Re’sValue Proposition
11
Swiss Re’s parametric solution offeringHow we support you
21/10/2019 12
+Risk
KnowledgeModular
IT platform+Product Design
Risk Assessment
• Risk analysis based on location input
• Exposure visualization (CatNet API)
• Proprietary risk models(Cat Server API)
End-to-end solution from front-end to payment system
• Front-end for clients*
• Policy administration
• Event tracking
• Automatic notification
• Proof of loss
• Automatic claims payment
Tailored product design
• Quoting and pricing
• Index / proof of loss definition incl. double trigger functionalities
• Automated proof of loss
• Automated claims payment
• Combining parametric and indemnity insurance
* in development
Flood Insurance
Congratulations! You bought the following coverage: Your location:
Limit: 10’000 USD Premium: 90 USD
User journey parametric insuranceOur sophisticated solution for the insurer makes the product simple for the insured
13
Product designCreating a smart index, deciding on (double)-trigger and proof of loss as well as pricing the product
Quoting and pricingPlatform provides instant quote based on location and selected limits
Policy administrationPlatform can be used to administrate policies
Event trackingPlatform monitors constantly if independent third party reports an event
EventIf a reported event passes the pre-defined threshold, the platform checks if any policies are affected
Claims calculationThe platform automatically calculates the potential claim
Proof of lossThe platform automatically does additional checks, if there was a loss and ev. reaches out to the clients to ask for further proof
Pay-outAutomated pay-out to legitimate policyholders
Insu
rer
Insu
red
Swiss Re Parametric IT Platform
Lessons Learnt
14
15
Challenges of parametric insurance
DistributionBasis Risk Regulators
15
Product Design
21/10/2019 16
Basis riskThe potential difference between the parametric payment and the ultimate loss
Perfect match Negative basis risk
Positive basis risk
Perfect match
Yes No Yes No
Did the index trigger? Did the index trigger?
Yes No
Did the insured suffer a loss?
Two types of basis riskThe fine line between
enrichment and impoverishment
Positive basis risk: Enrichement of the client
Negative basis risk: Impoverishment of the client
Actual loss
Lo
ss a
cco
rdin
gto
ind
ex
•Multi-trigger•Fraud detection
•Proof of loss•Gradual payouts•Granular data
Mitigation Measures
Basis Risk
Regulators: Key discussion pointsWe support you in your discussion with the regulator
21/10/2019 17
1
2
3
4
Clyde & Co LLP: Parametric Insurance Closing the Protection Gap, January 2018
Mitigate basis risk through careful and accurate modelling, product design, wording and consideration of alternative scenarios, reflected on contractual terms
Accurate and reliable local information to conform the triggers and calculations of pre-modelled loss as closely as possible to actual loss experience.
Mixed or hybrid models with parametric and indemnity based elements assist in building regulatory trust
All parties must understand how the cover works. Clarity and communication with the buyer and regulators
Regu-lator
Distribution: Through whom and how?We support you on finding the right distribution channel
21/10/2019 18
Insurance company
Affinity groups
Stand-alone
Government
add-onin path / upsell /
white labelled
branded
Companies (e.g. banks, telecoms)
Voucher
Who?
How?
Form
Distri-bution
1st Trigger
Is the policy in a affected area?
2nd trigger / Proof of loss Do satellite data confirm that the policyholder is in an affected area?
Combining elements of indemnity and parametric insuranceAnd thus making both insurances more efficient
21/10/2019 19
Indemnity claims payment
Loss adjustor
What additional loss did the client exactly have?
Loss adjustor: Visiting the premise and evaluate actual loss
Start indemnity processDid the insured suffer additional damages?
Platform: Identification of policies in flood zone based on official flood map
Parametric emergency payment
Platform: Confirmation of policies in flood zone
Platform: Automatic small pay out to cust-omer to cover emergency costs
Client: to initiate indemnity process
Purchase of indemnity policy…
… with a parametric top up
Distri-bution
Product design: Hazard intensity – limit – premium
Link zu App / Screenshot
We support you to identify the suitable hazard intensity, potential payout and premium
21/10/2019 20
Product Design
Success Stories
21
A client story: Parametric earthquake cover in Chile How our tech platform supports a global insurance provider to build a holistic parametric insurance offer
21/10/2019 22
.
The client Global insurance provider, which would like to cover the Chilean population against earthquake risks
The challenge
How can the client not only be supported in the product development but also be offered services along the whole value chain?
Our support
• Ideation and design of a tailored parametric insurance• Marketing material• Regulatory support for the approval of the product in the local
legislation
The product structure
• Limit: USD 10’000
• Trigger: Modified Mercalli Intensity ≥ 7.5
• Structure: Intensity based
• Payout structure: stepped
• Reporting Agency: United States Geological Survey ( USGS)
A client story: Parametric tropical cyclone cover in the USHow our support the building of a client’s index-based windstorm insurance on a online platform
21/10/2019 23
.
The client Global insurance company which wants to offer a fully automated parametric product for tropical cyclones in the US
The challenge
How to develop an online platform to deliver parametric TC insurance?
Our support
The IT-platform of Swiss Re helps with:• Policy administration• Event tracking • Claims payment• Accounting & reporting• Portfolio steering
The product structure
• Limit: tbd by endcustomer
• Trigger: Named windstorm event with 1 min sustained wind ≥x mph in the wind footprint at the calculation location.
• Structure: Intensity based
• Payout structure: stepped
• Reporting Agency: National Hurricane Center
21/10/2019 26
Insured
• Fast emergency cash in times of need with flexible usage of funds
• Uninsurable risk become insurable (inconveniences due to event / non-property damages)
• Simple, digital customer experience
• Affordable due to low limits and no claims process
• Adjustable to the needs (“design your own insurance”)
• Transparent process
Insurer
• Easy launch of innovative product with low investment and high consumer value
• Growth opportunity: New product to strengthen and grow your customer base and use new distribution channels
• Efficiency due to automation and no need for loss assessors.
• Profitability: Access to Swiss Re’s sound risk assessment, modelling and pricing expertise and parametric knowledge
• Positioning as innovative, digital insurer
Our solutions offers benefits for you and your clients
27
Any questions?
Thank you!
Gianni Biason
Contact us
Head Property & Specialty [email protected]
Lydia Pomp-BojerianovaHead Client Solutions [email protected]
Follow us
2828
