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One solution for non-damage business interruption


February 21, 2019   by Jason Contant


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Parametric insurance can help fill a gap in some policies by covering non-damage business interruption, a speaker said Tuesday at AXA XL’s Fast Forward LIVE event in downtown Toronto.

Caused by a variety of factors, including severe weather conditions, non-damage BI affects multiple industries – including agriculture, food and drink, tourism and construction. For example, a hurricane may not cause damage to a hotel, but may decrease their revenue stream due to fewer visitors to the area.

Parametric insurance is index-based insurance, triggering an automatic payout if certain conditions are met, such as a decrease in revenue or increased costs. One example would be if a Category 3-5 cyclone occurs within 25 miles of an insured location, there is a 50% payout, while if a Category 5 cyclone occurs within 50 miles, there is a 25% payout.

“So, you can still capture those non-damage business interruption effects,” said Karina Whalley, marketing and development manager with AXA Global Parametrics. She added that non-damage BI isn’t currently covered in a lot of policies.

Whalley was one of the presenters at the Fast Forward LIVE event, held at AXA XL’s office in Toronto’s financial district. She presented alongside Antoine Denoix, chief executive officer of AXA Global Parametrics.

Insurers can use weather, third-party and satellite data to tailor these parametric insurance products to client needs. In the past 20 years, the resolution of satellite images has progressed to the point that frost and excessive precipitation images, for example, can be used to trigger payouts, Denoix said. “It’s a key enabler to open new markets.”

Satellite resolution data is definitely getting more and more refined, Whalley agreed. “Before you had kilometre-by-kilometre grids data on a daily basis, now you are getting down to 10-by-10 metre grids information, and it can be on an hourly basis,” she said.

In the example of hail, it’s very localized, so the insurer would need ground sensors on the insured’s location, possibly integrated with satellite data. Whalley reported that some farmers are even starting to pay for their own weather stations to be set up.

While AXA XL currently does not offer parametric solutions in Canada, “it’s not a question of if, but when,” said Urs Ulmann, CEO and chief agent at AXA XL Insurance Canada. “We are working our way to make sure we have solutions that we can deploy in the Canadian market that fits with the regulation and accounting rules that apply to all of us in Canada. I hope it will be very soon to deploy on Canadian paper in the Canadian market.”


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