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Parametric insurance opportunity as German waterways face disruption

26th October 2018 - Author: Matt Sheehan

Shipping companies in Germany could look to insurers for a new kind of parametric coverage following an unprecedented drop in the water levels of some rivers, caused by months of scarce rainfall and hot weather.

German publication The Local reported that the docks at Cologne’s main port haven’t seen any new ships for a week as water levels on the Rhine dipped to a record-breaking low of 77 centimetres, well below the average of three to four metres for October.

Meanwhile, the German government has announced the decision to release strategic fuel reserves in response.

The move, ordered by official decree, will see Germany unlock reserves of gasoline, diesel and jet fuel to help affected regions along the Rhine waterway.

A spokeswoman for the economy ministry told AFP the temporary measure was “specifically aimed” at certain areas and that Germany was not facing “a long-term crisis.”

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Insurers may now have an opportunity to provide these shipping companies with a parametric coverage that would trigger based on the water levels of rivers.

A backlog of shipping containers has built up at Cologne as rail links have proved unable to cope with the extra strain, while the few boats still able to make it along the river have had to drastically reduce their cargo.

Jan Boehme, a hydrologist with the Water and Shipping Authority, told The Local that the Rhine’s water level was at “the lowest level ever measured,” adding that such a crisis had not been seen since records began in 1881.

Dangerously low water levels have also been recorded across other rivers in Germany, such as the Elbe, and many experts have suggested that climate change may be the cause.

If this is the case, shipping disruption may become a more common risk across many other countries as summer months become longer and hotter and water levels are affected.

This would create an even more pressing need for insurers to offer some kind of parametric cover to protect companies against business interruption losses.

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