alternative solutions to cover your risks differently in a changing world

How innovative solutions tell that parametric coverage can help companies meet long-term challenges such as energy transformation, disruptions in the supply chain, digitization of data and CSR requirements Corporate Corporation)?

The world is witnessing a wave of short and long term trends that are destined to drastically shape the future of our society and our planet.
Energy transformation, supply chain optimization, digitization of data and CSR requirements are the main examples of the way in which a rapidly changing environment poses many challenges to stakeholders. When barriers create opportunities and therefore investment, the public and private sectors face extreme uncertainty on the one hand and the need on the other.

“In this context, the financial sector must play an active role in encouraging innovation, enabling the use of new technologies and providing the level of support that a dynamic and complex context requires.” Marco Adamo points out.

At the same time, the business world needs to lead the way and be the starting point, given its enormous potential for impact.

Innovative insurance solutions to meet the challenges of companies

The insurance industry has long been seen as reluctant to change. The results of this attitude are obvious in terms of industry resilience: customers are suffering from this situation and are looking for other solutions.
Nevertheless, there is an abundance of data, skills and dynamism to enable movement in the works of change needed. While traditional underwriting remains the main form of risk-taking, companies are increasingly taking other approaches to better meet their needs.

An example can be found in the climate action space. The Swiss Re Institute estimates that rising temperatures could reduce global GDP by 14% to $ 23 trillion by 2050 compared to a world without climate change. The public and private sectors are now rushing to halve CO emissions2 by 2030. However, many of the technological advances to combat global warming will lead to new risks or evolve existing ones.

Traditional subscription is likely to continue to play a key role in tackling obstacles in type 1 emissions, following the basic production process of evolutionary enterprises. However, the problems presented by Category 2 and 3 emissions may require a more sophisticated approach and the demand for innovative solutions could also increase.

Parametric insurance is transforming the approach to risk transfer

In s’appuyant sur un indé predéfini and a payment structure agreed in advance, the parametric coverage guaranteed transparency and speed of payment, which allows to solve the problems of uncertainty and liquidity.
For example, the abundance of natural disaster data (NatCat), combined with extensive expertise inside and outside the insurance industry, has allowed NatCat parametric coverage to increase in recent years. .

However, is it also applied in these new risks related to energy transformation, disruptions in the approval chain, digitization of data or CSR requirements? Until now, when there was data, there was a possibility of parametric insurance, but what happens when there is no historical data available?
New technologies and innovation are, by definition, accompanied by a lack of historical data. In these specific cases, there is no basis for retrospective approaches that combine exposure and experience. This is why non-traditional, forward-looking perspectives are becoming increasingly necessary.

“In a landscape, a complete alignment between the insurance sector and businesses is key to developing tailored proposals” says Marco Adamo.

Can supply volumes be considered an index?
Would digital sensors and binoculars open the door to reliable and verifiable data?
What settings could be used to meet CSR requirements? What will happen if one does not reach the target suppliers of the “net zero” strategy?

There is still no good answer to these questions, but a regular dialogue between the insurer, the broker and the insured is certainly the first step in implementing an innovative approach.
Contact us today to learn more about our alternative risk transfer solutions beyond traditional insurance.

Content proposed by Swiss Re Corporate Solutions

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