Experts are predicting a quieter Atlantic hurricane season in 2023, but cautionary advice from Katie McGrath from Swiss Re Corporate Solutions emphasises the critical need for preparedness and financial protection, as one devastating storm can have catastrophic consequences for communities.
McGrath, Regional CEO North America of Swiss Re Corporate Solutions, highlights that even in a season with fewer named storms, hurricanes, and major hurricanes, it only takes one devastating event to leave communities shattered and lives upended.
In the wake of recent historical storms such as Andrew, Sandy, and Ian, the importance of preparedness and financial protection cannot be emphasised enough.
To ensure coastal residents, businesses, and communities are adequately safeguarded, experts urge proactive measures. While traditional indemnity insurance covers observable physical damage and lost assets, the broader financial losses stemming from operational revenue, employee productivity, and supply chain disruptions require additional coverage.
Thankfully, advancements in hurricane observation data and innovative solutions offered by the insurance industry now address these previously uninsurable losses.
Parametric insurance solutions, designed to simplify risk transfer options, utilise reputable measurements of hurricane intensity, such as predetermined wind speeds at insured locations, to determine if a payout is due and, if so, the appropriate amount.
These policies offer clear and succinct wording, ensuring policyholders understand the coverage terms. Moreover, they feature rapid and transparent post-event claims processes, delivering much-needed proceeds precisely when they are needed the most.
Buyers of parametric insurance have already experienced the direct benefits of their proactive approach. Utility companies, for example, have been able to repair assets that are traditionally difficult to insure in the conventional market.
A notable success story comes from AboitizPower in the Philippines, which promptly repaired damaged transmission and distribution lines following Typhoon Rai in 2021, thanks to their parametric purchase.
Similarly, other clients received payouts for Hurricanes Ian and Nicole last year within a mere 14 days of the storms making landfall. These timely injections of funds were vital in jump-starting their recovery efforts during challenging times.
As the hurricane season progresses, experts urge individuals, businesses, and communities in hurricane-prone regions to develop comprehensive recovery plans.
With the 2023 Atlantic hurricane season now underway, our insurance-linked securities (ILS) focused sister publication, Artemis, recently spoke with Jeff Waters about the forecast for the months ahead.
