Parametric cat bonds could transform disaster relief: ICEYE
Parametric cat bonds will play a “crucial role” in regions such as Africa, South East Asia, and even in developed US communities grappling with challenges such as flooding and wildfires.
The involvement of key stakeholders, like those at Monte Carlo, will be “critical” to developing financial resilience mechanisms to help economies and communities tackle these concerns, according to Stephen Lathrope, global head of insurance, and Andy Read, global head of government solutions, at ICEYE.
“It is very important that we have public-private partnerships to jointly create more opportunities and help governments deal with disasters,” Read stated, emphasising that swiftly grasping the full impact of nat cat events such as floods and wildfires can transform response strategies for better recovery.
Read thinks parametric will eventually become an important feature in the market. “I would love to get to a point where we call these parametric disaster relief programmes a standard mechanism,” he remarked.
Lathrope pointed out the increasing prominence of parametric insurance structures within the risk transfer sector. He said: “While we can’t help with the pricing or with the market appetite, we can offer tools that enable primary insurers to operate effectively.”
“This will allow them to support communities and businesses, especially in the current reinsurance landscape, with alternatives such as cat bonds triggered by parametrics,” he added.
Real-time data
In recent collaborations, ICEYE has teamed up with the Australian government to provide real-time data on flood and bushfire hazard, strengthening disaster response. The partnership is built on ICEYE’s Flood Insights that was launched in 2022.
ICEYE provides unique insights leveraging its own constellation of more than 25 Synthetic Aperture Radar (SAR) satellites to monitor the Earth. These insights offer a curated analysis detailing structure-level flood extent and depth information within 24 hours of the peak of flooding.
The bushfire insights provide rapid property damage assessments in near-real time, enabling emergency responders to quickly understand the true impacts of the event. better target critical resources, and ultimately improve recovery outcomes for flood- or fire-affected communities.
ICEYE is gearing up to launch two new projects in Africa and another in Latin America. Lathrope noted that he is seeing a “tipping point” and growing interest in deploying parametric relief programmes, which indicates a transformative shift in the industry’s approach.
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