Reinsurance News

Increase in nat cat driving the demand for parametric insurance: Swiss Re CorSo’s Cole Mayer

23rd May 2023 - Author: Jack Willard

With the industry witnessing an increase in frequency and severity of nat cat events throughout the last several years, and some of them even going on to become some of the costliest events ever recorded, Swiss Re Corporate Solutions’ Senior Structurer North America, Cole Mayer, suggests that this is one of the contributing factors that is driving the increase in demand for parametric insurance.

Mayer states that the increase in nat cat events has caused people to think differently about how they manage their risks, instead of just going down the route of using traditional insurance.

He said: “We are seeing a lot of these events, and unfortunately, they’re showing no signs of slowing, and that includes not just weather related perils in the US and Caribbean but also other perils in Europe and the Asia Pacific region. Because of this increase that we are witnessing, people are beginning to think differently about how they can manage their natural catastrophe risks.”

At the same time, Mayer also explains how the overall quality of data that is available across the industry is another major factor that is driving the demand for parametric insurance.

He said: “Both the quality and the availability of granular data is better than it’s ever been before, and it keeps improving. What that means is we know much more about what’s happening at specific areas within these events.

Tremor - The modern way to place reinsurance

“Because the data that we have access to today is much more advanced than in the past, we can design better, more responsive covers for our clients.”

Further, Mayer addresses whether Swiss Re has any plans in place to expand its parametric solutions within the near future.

“We are always looking at ways to push the envelope and innovate, but we want to make sure that we innovate in the right way and at the right speed. We don’t want to move too quickly and then find that we have made a mistake, either in the design of the cover or the data provider.” he said.

“We want to not only protect ourselves but, more importantly, we want to make sure that we are protecting our clients by making sure we have the best structure design and the best data providers available. Because these tools are very important for our clients to manage these risks effectively, our clients need to know that when they enter a contract with us it’s going to behave the way that it’s advertised.”

Mayer explained that flooding is a “very difficult” peril to get right due to it being a very localised peril which means that in many cases the data has to be available at the individual location level.

Nevertheless, Mayer states that even though the industry faces difficulties with flooding, it is still an area that the company continues to push from an innovation perspective, as well as other areas too.

“It is important that we not only innovate, but also expand on the tools and resources that we currently have that we know are enormously powerful and useful for our clients,” he added.

“We tend to take the approach of learning and understanding what problem our client is trying to solve, and then we can build the solution around the problem, as opposed to sort of pushing a product on a problem and hoping that it solves it.”

Additionally, Mayer also reflects on how effective market disruption has been for parametric insurance.

“Market disruption, which has impacted the cost and the availability of traditional nat cat capacity, has really made clients think about how they want to structure their programme over the long term.

“It’s great to solve short term problems, and we try to do that in the best way that we can. But the real way that this market is going to move forward in a sustainable way is through a large subset of clients thinking differently about nat cat risk long term, and we are starting to see that trend play out.”

Print Friendly, PDF & Email

Recent Reinsurance News