Parametric insurance for marine and maritime industries can provide an added protection against weather and geological risks.
  • SHARE
Index-based coverage for weather events

Nearly every company has some susceptibility to weather or geological events—either through a direct impact to its operations, or indirectly because of disruptions to its supply chain or customer base. The maritime industry knows the risk of weather all too well. Economic consequences of wind, wave and storm activities due to disruptions in operations and supply chain, or as simple as damages from unmet contractual obligations are real and not always recoverable by standard property and casualty policies.

Marine

Most companies are well acquainted with traditional marine insurance. You pay a premium, and if you incur a loss, the insurance company compensates you—sometimes after a grueling process of proving cause and submitting proof of damages. Parametric insurance is somewhat different. As the name suggests, compensation happens when preagreed-upon parameters, or so-called parametric triggers, are fulfilled. These triggers are directly linked to the parameters of a risk event.

Parametric coverage can fill in these gaps and help manage risks to your supply chain, your business itself and your financials. These are highly customizable policies for the individual risk being addressed. They pay quickly, without long lag times for adjustment of losses, and can be written to address economic losses suffered as the consequence of weather-related occurrences and not solely relying on damage to your physical assets.

A business could use this money however it chooses, such as paying deductibles on its other insurance policies, funding its recovery efforts or covering any financial losses due to increased costs, lack of sales or lost profits.

The versatility of parametric insurance means these policies could apply to nearly every sector of the economy that faces economic and catastrophic risks. For example:

  • An offshore construction company can’t safely build a windfarm or an oil rig if wind speeds or wave heights exceed certain limits. A parametric policy could cover the company for days where construction is delayed for these reasons.
  • A food wholesaler supplies the cruise ship industry and is stuck with produce spoiling after the ships are sent from port, but with no physical damage to its buildings or operations. Coverage could be designed to address the proximity and intensity of storms within a specific area. This would help the company manage the impact of lost inventory, along with any decline in sales to traditional retailers, in the event of landfall and supply chain disruption.
  • A port sustains significant and long spells of extreme weather, with icebreaking and general decreases in efficiency—something that is correlated to past performance of freeze and duration. A policy could be structured to help pay for such an event.
  • An inland shipping channel is only navigable with water levels above a 12’ depth. Extended drought and/or lack of precipitation create a risk of the channel being shut down for weeks or more. A policy could be based on varying levels of the river’s depth dropping below 12’