Bermuda-based Kalista Global, has announced a property insurance product called “Parametric Catastrophe Solutions”. The newly developed product provides clients with significant savings on their windstorm and earthquake catastrophe insurance premiums by adding specific parametric triggers,based on the intensity of the cat event, to what would normally treated as a “covers all”policy.
A statement from the Company said: “With traditional catastrophe products, a client’s properties would have a premium and deductible that is based on the likelihood of an event occurring regardless of the magnitude or intensity. This calculation can overestimate the potential losses of an event and is reflected in a sometimes higher than necessary premium and deductible amount.
“By applying a parametric trigger that takes into account the decreased chances of an event exceeding a certain magnitude, the client can have complete coverage that more accurately calibrates the assessment of the risk and makes increased limits more affordable.
“The solution will likely be tailored to reinsurance and retrocession covers alike, parametric triggers generally work very efficiently for retrocession covers specifically as they cut across all of a reinsurers customers meaning they can bundle by location.
“The Parametric Catastrophe Solution is targeted to companies with greater than USD$50m of total insured value and the solution has capacity limits of USD$80m which allows for widespread client access to the potential savings. The team has extensive expertise applying and structuring Parametric Windstorm and Earthquake CAT solutions and can also be engaged on a stand-alone basis to advise.
“As an example of the savings this solution can offer, for clients with properties that have been engineered to withstand the moderate magnitude events with zero to minimal damage, then a solution that is priced to only trigger at a high magnitude potentially becomes 20-70 percent more affordable for them.
“Coverage can also be structured to respond to a client’s worldwide CBI CAT exposure,on a DIC/DIL basis, as an adjunct to their core (re)insurance program.”
Spencer Conway, Executive Vice President, of Kalista Global explained “We are continually trying to innovate and think out of the box – this product offering is another example of that thinking. We think parametric triggers are going to play a much larger role in the industry going forward.
“For instance, if you look at a client’s risk profile for earthquake, the models will give you an extremely high probability for low to moderate magnitude earthquakes, often 100% probability every 250 years. However, in reality the high magnitude events are much less probable and therefore it can often be much more cost efficient to insure if you can define a more meaningful parametric trigger point so the client has the coverage needed, but with the premium instead reflecting a defined probability.”
“Initially the Parametric Catastrophe Solutions will encompass windstorm and earthquake exposures as these risks have a plethora of historical data which form the geographic probability”, says Mr. Conway. “We believe this product offering will have tremendous appeal for clients looking to have a more efficient and sophisticated insurance program.”
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