LFP088 – Catastrophe, Acts of God & Parametric (Event-Based, Fixed-Payout) Insurance Adam Rimmer FloodFlash

52% of UK SMEs based floodplains don’t have flood cover! Insurers struggle to insure flood risk due to the difficulty of modelling and assessing the economic impact. Many people/businesses are unable to get insurance cover at all. Every year, globally, there are $50bn of flood caused economic losses of which only $9bn are covered by insurance.

Into the breach (geddit?) step Floodflash formed by Adam Rimmer and Ian Bartholomew experts in modelling event risks – together with the important fixed-payout insurance concept (doesn’t need much reflection to see how good that could be) this constitutes parametric insurance.

Floodflash is an Insuretech startup with great potential.  Its also an opportunity to hear from a firm in the FCA sandbox.

Parametric insurance sounds very techie but in its best known form – life insurance – has been around for centuries.

The market failure above is huge.

On this show we discuss the role of event-based, no-exclusion, instant settlement in addressing this problem. Many people/businesses simply cannot get insurance at present.

Topics discussed on the show include:

  • the world and natural disasters
  • cricket and parametric insurance coverage
  • parametric means that it pays out on an objectively measurable event
  • life insurance is an ancient form of parametric insurance (no loss adjuster, no exclusions, no debate whether it was a pre-existing condition)
  • Cell biology as training for insurance (?)
  • Adam (and his co-founder Ian’s background in modelling event risks at RMS, “the world’s largest catastrophe insurance company”
  • why insurance folk always seem to have to apologise for being in insurance whilst no other FS strands do
  • the nature of models and modelling
  • catastrophe models versus FS models
  • short-term versus long-term catastrophe modelling
  • weather derivatives as another category of parametric insurance
  • the origins of parametric insurance lie in the difficulty of quantifying certain types of risks which otherwise one wouldn’t be able to cover – eg how much would an insurance company pay out on someone’s death if they had to assess the actual economic impact?
  • the value of fixed-payout insurance versus traditional insurance
  • “insurers struggle to insure flood risk at the moment due to the difficulty of assessing the economic impact”
  • 52% of small businesses in UK floodplains don’t have flood cover
  • every year $50bn of flood losses around the world of which only $9bn are covered by insurance
  • negating the need to assess and verify the uncertain economic impact means insurers can write flood risk with much more confidence, and FloodFlash can help them assess the impact meaning there are no more blacklisted areas
  • for people in floodplains right now their only option has been to spend lots of money on flood defences – and this won’t lead to any changes in insurance cost anyway :-!
  • floods have historically been hard to model as well as to assess damage
  • the leap forward has been in computing power – being able to model based on a far finer grid of datapoints
  • Floodflash are working with a large US insurer, brokers as the road to market
  • “Evangelical selling”
  • measuring the “parameter” in parametric insurance – differing approaches per type of natural catastrophe – eg damage caused by movements of air, earth, water require very different approaches
  • Floodflash patent-applied for sensors
  • Hurricane Sandy 2012 and catastrophe insurance
  • thanks to last years LFP partners Archover and Synechron and a welcome to this years sponsors Blue Motor Finance and Smart Pension
  • Floodflash business plans
  • FCA sandbox – the first participant on the LFP 🙂

And much much more 🙂

Share and enjoy!