Liberty Mutual Re, the reinsurance arm of Liberty Mutual Insurance Group, MGA XS Global, and technology provider Safehub, have launched the world’s first sensor-based, parametric reinsurance treaty for earthquake risk.
According to the announcement, this treaty marks a new era of disaster risk management for insurance firms, risk managers and policyholders, as it is one that harnesses real-time building-specific sensor data.
Insurers will be able to use the smartphone-sized sensors provided by Safehub, placed in individual properties to accurately measure the shaking at the site, which will ultimately minimize basis risk and provider faster payouts.
At the same time, LM Re will begin by selling multiple policies through XS Global subsidiaries in Mexico, employing Safehub’s sensor technology.
It is important to remember that Mexico is in a seismically active region, and Mexico City stands as the most populous city in Latin America. The earthquake risk is incredibly significant, and ground shaking is heavily influenced by local soil conditions and can only be accurately measured with sensors placed within properties.
In the past, traditional parametric policies have used proximity to the epicenter and regional estimates of earthquake intensity as triggers. Both can result in significant basis risk.
Dieter Winkel, President, LM Re, commented: “A sensor-based, parametric trigger earthquake policy delivers accurate, efficient and direct claims payouts and simplifies processes for policyholders, brokers and insurers alike.
“Delivering exceptional client service through every tool at our disposal, including this kind of cutting edge technology, is central to LM Re’s mission and mutual values. We are delighted to be working with the professional and innovative teams at Safehub and XS Global to deliver this groundbreaking policy to the Mexican market”.
Andy Thompson, Co-Founder and CEO of Safehub, said: “We are pioneering a pivotal moment in the insurance industry. By combining unparalleled earthquake sensor technology with the expertise of LM Re and the innovative capabilities of XS Global, we are reshaping the landscape of risk management.
“This collaboration has led to the creation of the world’s first advanced earthquake parametric reinsurance treaty that harnesses the power of real-time building sensor data and cellular networks. Together, we will scale this technology for the benefit of everyone, and in doing so redefine how societies can rebuild and recover in the face of adversity. This marks a significant leap forward in our mission to enhance resilience and support communities worldwide in the face of disaster.”
Alejandro Solorzano, XS Global Parametric Managing Director, added: “Using sensors like Safehub’s earthquake parametric sensor to mitigate basis risk is the future direction of the parametric insurance market. This innovative technology provides real-time alerts during earthquakes, enabling individuals to make informed decisions and potentially save lives. The Safehub earthquake parametric sensor helps people respond effectively in the event of an earthquake and supports better decisions about evacuating buildings.
“Safehub sensors, the latest innovation in low-cost sensor technology, can be used in almost all structures in the private and public sectors. Also, we can deploy hundreds of sensors rapidly if necessary, so this represents a significant advancement towards a more resilient and prepared population in the event of a major earthquake”.
