Insurance and reinsurance marketplace Lloyd’s of London has launched a new business interruption policy for small and medium sized enterprises (SMEs) that uses a parametric trigger to protect against IT disruption or downtime.
The new product, called Parametrix Insurance, is led Tokio Marine Kiln (TMK) and supported by other members of Lloyd’s Product Innovation Facility, including RenaissanceRe.
It removes the traditional indemnity trigger used by most policies and instead relies on parametric triggers that automatically pay out if a customer’s critical IT services are disrupted.
This could apply to services such as cloud, e-commerce or payment systems, Lloyd’s suggested, with the aim being to significantly reduce the time insurers spend assessing a loss or adjusting a claim.
“Businesses have shifted to managing most of their critical IT operations by using third-party service providers, thereby increasing their vulnerability to disruption,” said Yonatan Hatzor, Co-founder and CEO of Parametrix Insurance.
“As a result, critical technology downtime has become the fastest growing risk for businesses today, whether you are a technology company or not. On top of this, the existing claims process in the field is complicated, expensive and time consuming,” he explained.
“Parametrix’s approach addresses all these issues, providing a solution that saves both time and money, while making tech insurance accessible to new business segments. We are thrilled to launch the first ‘off-the-shelf’ parametric insurance product for IT downtime. This is a great milestone for us and we are grateful to TMK, Howden and Lloyd’s Product Innovation Facility for helping us to develop our product and providing us with valuable insights and support along the way.”
Trevor Maynard, Lloyd’s Head of Innovation, also commented: “We know that insurance products and services have to evolve to respond to the challenges of the COVID-19 pandemic and help our customers cover new or heightened risks that they may encounter now or in the future.”
“That is why Lloyd’s Product Innovation Facility and our new Lloyd’s Lab cohort are both looking at ways the industry can do this more effectively,” Maynard added. “I am delighted to see evidence of this today with the launch of Parametrix.”
Tom Hoad, Head of Innovation at Tokio Marine Kiln and Chair of the Product Innovation Facility, further stated: “Third party cloud service providers help our clients trade within an ever-changing world and Parametrix have done a great job in developing an insurance product that helps build resilience in this space.”
“We hope that the PIF BETA (comprising TMK, RenaissanceRe and others), which is supporting Parametrix Insurance with underwriting capacity, continues to be an effective accelerator for other technology-driven product solutions.”
And finally, David Rees, Cyber broker at Howden said: “It is very exciting to work with the Lloyd’s Product Innovation Facility and the PIF BETA led by Tokio Marine Kiln on this ground-breaking project, which combines the best of Lloyd’s product innovation and capacity, as well as working with our market leading cyber capability in Howden Israel led by Shay Simkin.”
The launch of this new policy from Lloyd’s comes at a time when business interruption coverage is being treated as a particularly sensitive subject in the re/insurance community, following the FCA’s judgement on claims related to the COVID-19 pandemic earlier this month.