Cyber parametric is on its way
Demand is increasing, across geographies and classes of business, for parametric insurance products. But the key to the future success of parametrics will be a wider understanding of where it meets gaps in coverage aligned to clients’ needs, Gethin Jones (pictured), co-founder & executive director, Skyline Partners, told Intelligent Insurer.
“Demand is everywhere for a different type of insurance product, one that covers non-damage losses and doesn’t rely on indemnity. A wider understanding of this will enable brokers to provide improved and differentiated offerings and generate new sources of premium income for risk carriers,” he said.
Skyline Partners is a UK parametric insurance specialist. Some of its deals include heat-stress protection backed by Credit Agricole Pacifica and SCOR for dairy farmers in France; climate relief for loans to farmers in Jamaica backed by Munich Re, accessible via credit unions in partnership with Howden Group; and coverage for losses arising from violent incidents in the vicinity of businesses, backed by Aegis London.
Jones adds that it is working on a parametric cyber product. “We see huge demand and matching potential for parametric cyber cover, and will be launching a product soon which I can genuinely say will be unlike anything else in the market.”
“These products work very differently from traditional insurance.” Gethin Jones, Skyline Partners
He said the biggest inhibitor to growth for all parametric products is education—of brokers and clients. “These products work very differently from traditional insurance, but with it they are easier, cheaper, and vastly more efficient for everyone involved. It’s our challenge to multiply demand by doing the work to explain those characteristics.”
Parametric and index-based insurance remains quite niche, and a fraction of the annual premiums written when compared to traditional insurance offerings, he notes. Growth will be achieved through innovation. He cites the company’s development of INSDEX, an index-based underwriting technology, which is at the core of its products.
“It seems that it is easier for a smaller company to develop and fine-tune the technologies that allow parametric insurance—or any other kind of specialist cover—to work. Plus, it’s easier for a broker with the specialist market connections, or a carrier with a specific risk appetite, to partner with a company like us than to develop the solutions on their own.
“I guess it’s about specialisation,” he concluded.
