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Descartes Underwriting, a Paris-based parametric-specialized provider of corporate insurance against natural catastrphe and climate risks, has formed a partnership with Reask (Sydney), a tropical-cyclone risk analytics firm. The partnership aims to promote the advancement of parametric cyclone insurance products by combining Descartes’ ability to incorporate state-of-the-art technology into its parametric product design, with Reask’s cutting-edge wind speed data, according to a Descartes statement.
The partnership addresses the threat of named wind storms to businesses, communities and public entities in coastal megacities, deltas, and islands. Descartes notes that last year alone, cyclone-driven economic loss is estimated to have reached $78 billion worldwide, with 68 percent of losses ($53 billion) not covered by insurance. Even in the more established North American market, Hurricane Ida, which carried an economic impact of an estimated $95 billion USD, illustrates the windstorm coverage gap, with only $30 billion USD or 32 percent of losses insured.
The partnership also seeks to address the insurance protection gap by expanding global cyclone parametric coverage. The consistent global coverage of Reask’s tropical cyclone product, Metryc, enables the expansion of parametric insurance policies into regions and geographies where data limitations impeded previous coverage, according to Descartes. Also, Reask’s ability to augment scarcely available ground-level observations and deliver high-resolution wind hazard intensity metrics within days following an event greatly supports the deployment of Descartes’ parametric products. Descartes Underwriting has worked in collaboration with Generali Global Corporate & Commercial (Milan) since 2020 to improve corporate uptake of parametric risk transfer solutions globally.
As Nat Cat and extreme weather risks evolve due to climate change, the inherent difficulties in obtaining accurate data due to the destructive nature of cyclone activity are also likely to be accentuated, Descartes says. The company says its partnership with Reask addresses these challenges as the scientific teams at both organizations collaborate and nimbly apply machine learning to improve tropical cyclone wind field and terrain interaction models.
“Data dearth in certain regions remains a gating factor to providing parametric insurance covers that enhance resilience,” comments Kevin Dedieu, Co-founder & Head of R&D, Descartes Underwriting. “Reask leads the charge in its ability to quickly capture a windstorm event or provide wind at location maps in certain areas, such as the South Pacific, where data is less accessible.”
Expanding the Reach of Parametric Insurance Solutions
In framing the impact of having reliable observations, Dedieu stresses that precise, high-quality data is a prerequisite to all parametric insurance structures. “Wind-at-location data, such as that provided by Reask, amplifies customization and reduces basis risk in game changing ways that serve to benefit parametric insurance providers, brokers, reinsurers, and risk managers for public entities and private sector clients worldwide,” he says.
“Our Metryc solution enables the transfer of financial risk in all corners of the globe, expanding the reach of parametric insurance solutions such as those provided by Descartes Underwriting,” comments Thomas Loridan, Co-founder and CEO, Reask. “It is thanks to our machine learning approach to wind modelling that Metryc can be used as a reliable third-party view of tropical cyclone wind speed data even in regions where observations are scarce.”