Hiscox develops parametric product to narrow the protection gap
Hiscox is developing a broad parametric product offering to help narrow the protection gap, according to Daniel Vestergren, Hiscox Re’s chair of international business.
He said the product is being developed over the next 18 to 24 months, describing it as “a very exciting evolution of the traditional re/insurance product”.
Vestergren said: “We believe our ‘twist of lime’ approach to innovation, through making small but creative adjustments to our current product suite, will help tackle issues such as beach erosion in Mexico and the protection of the coral reefs in Hawaii.”
The new product will supplement two products Hiscox has launched in the US, FloodPlus and FloodXtra, which Vestergren predicted “will continue to gain traction as cedants become increasingly aware of climate-driven flood risk”.
Climate change will increase demand for reinsurance products, added Vestergren.
“It is difficult to predict the environmental impact of climate change, but whatever the outcome may be, we firmly believe that reinsurance will be a core part of the solution,” he said.
Hiscox is closely monitoring studies assessing whether climate change is increasing the risk of slower-motion hurricanes stalling over land in the way Hurricane Harvey did in 2017, said Vestergren.
“We are also carefully assessing what threat excessive rainfall and rising sea levels will pose to inland and coastal flood risk,” he added.
Vestergren said the reinsurance industry had a responsibility to inform people of the risks they face, in order to help them prepare and build resilience.
“We want to empower our cedants to innovate and grow,” he said. “With climate change amplifying the complexity of the market, it is vital to stay focused and work with cedants to solve their fundamental needs: reducing capital requirements, minimising earnings volatility and improving solvency.”
He called institutional investors to action, as long-term custodians of global wealth.
“By partnering with the reinsurance industry that has a strong understanding of tail risk, we should have a uniquely powerful recipe to build climate change resilience through the private sector,” he said.
Vestergren said he was encouraged by the response from industry following the losses it has experienced in the last few years.
“We see the potential for a healthy partnership that drives the industry towards a better, more proactive understanding of risk, and significant growth opportunities for investors,” he concluded.
