Considering new ideas and products may not always seem like a priority in times of crisis, but, says Fernando Villar COO EMEA at Swiss Re, this is precisely the time when innovation and partnerships can make a real difference.
In these uncertain times, many economists are predicting the worst downturn since the great depression. The global pandemic is hitting the global economy hard at a time when economic resilience was already low to start with. The recovery is not expected to be easy.
This is something Fernando Villar, chief operations officer and head of P&C Solutions EMEA at Swiss Re, has been giving a lot of thought. “I quite literally wake up and go to sleep thinking about how to help our clients and business partners to grow, be more efficient, and ultimately, how to help make the world more a resilient place,” he says.
Technology is making everyday life so much easier, but Villar says it could do a lot more.
“How can innovation and Swiss Re’s position as a leader in digital transformation help? And why is it so important to think about that now, especially in these dark times?”
Referencing the maxim about recognising opportunity in a crisis he points to new products, partnerships and ideas that he says, “have the potential to change the insurance market”.
Here are Villar’s simple examples of innovation that he says have only become possible very recently.
Satellite-based soil moisture index insurance
Image: The soil moisture map from April 2020. It shows significant droughts in several European regions at the beginning of the crop season.
Summer 2020 is expected to be one of hottest on record, according to the National Oceanic and Atmospheric Administration. Villar says that this forecast means drought will be high on Swiss Re’s agenda again.
“Globally this is the number-one threat to farmers – it regularly endangers the crop yield and business of farmers. As it is often not covered by insurance, this blocks access to credit – and makes the dark days even darker.”
Reinsurance offers an answer despite the current challenges of a global economic contraction. “At Swiss Re, we have developed the state-of-the-art Drought Index Solution – a satellite-based soil moisture index developed in cooperation with our partner VanderSat, a global provider of satellite-observed soil moisture data.”
From spring 2020 this innovative soil moisture solution will be available in 10 European countries. Villar says: “The greatest impact of this solution can be seen in Kazakhstan, where millions of hectares of land owned by thousands of farmers will now be insured against drought. This project, in collaboration with Swiss Re partners Qoldau and Association of Agriculture Insurance, offers full transparency to farmers on the drought and insurance structure and payouts for the first time.”
Parametric solution with immediate payment after the event
In 2019, $137 billion was lost globally due to natural catastrophes. Yet only 38 percent of this was insured, according to a Swiss Re Institute Sigma report published in February 2020. Villar says that while parametric solutions probably cannot fill this gap in coverage, they can help to make it a lot smaller.
“Parametric insurance – a type of insurance that uses an index to trigger payment immediately after an event such as an earthquake or rainfall – allows for simple, fast purchasing and optimised pay-out processes. Solutions developed by Swiss Re enable fully automatic insurance offerings in a concise, cloud-based, modular ecosystem.”
He says that this ecosystem enables customers to access coverage that may previously have been unaffordable or inaccessible, and companies can benefit from cheaper, bundled off-the-shelf solutions. One example of parametric insurance making a real difference came in the aftermath of the hurricanes that hit the Caribbean in 2017.
“It shows how impactful and fast our help can be. In the midst of the crisis, we were there to assist with ‘loss of income’ coverage, which combines property damage, business interruption and supplemental loss cover,” says Villar.
He points to an example where a hotel damaged by the catastrophe experienced severe losses, forcing them to close for reconstruction and repair works. On top of this, some of the losses, including destroyed or washed-away beaches and golf courses, were only insured to a small extent. “Here, the new parametric hurricane insurance provided an effective solution for our business partner and helped them to be protected against future financial losses,” says Villar.
Working with partners to speed up innovation
The satellite-based soil moisture index insurance and the parametric hurricane insurance both demonstrate that Swiss Re can help overcome negative situations, says Villar.
“Partnerships, innovative product design and expanding offerings with high consumer value, along with working with 15,000 colleagues at Swiss Re, makes me proud.
“Our work today is all about knowledge, placing the customer at the centre and partnerships that create mutual benefits – the examples I’ve mentioned are just two of many. In recent years, we've worked with partners on new products and approaches such as parametric, telematic and cyber and natural catastrophe products, just to name a few.
“As the economy is slowing down, we need to speed up our innovation, double our efforts and get back on our feet.”