Alternative solutions to cover risks differently in a changing world

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How can innovative solutions such as parametric blankets help companies address long-term challenges such as energy transformation, supply chain disruption, data digitization, and corporate social responsibility (CSR)?

The world is witnessing a wave of short-term and long-term trends destined to dramatically shape the future of our society and the planet.
Energy transformation, supply chain optimization, data digitization, and CSR-related requirements are typical examples of how rapidly changing environments pose many challenges to those affected. Obstacles create opportunities and thus investment, but the public and private sectors face extreme uncertainty on the one hand and need to act on the other.

“In this context, the financial sector needs to play an active role in facilitating innovation, enabling the use of new technologies, and providing the required level of support in such complex and dynamic contexts. . “ Emphasize Marco Adamo.

At the same time, the corporate world needs to be a leader and first focus, given that it is very likely to have an impact.

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Innovative insurance solutions to meet business challenges

The insurance industry has long been regarded as reluctant to change. The result of this attitude is clear in terms of resistance from the sector. Customers are suffering from this situation and are looking for other solutions.
Still, we have a wealth of data, skills, and momentum to enable us to implement the changes we need. Traditional underwriting remains the main form of risk-taking, but companies are increasingly adopting other approaches to better meet their needs.

An example is in the climate action space. The Swiss Re Institute estimates that rising temperatures could reduce global GDP by 14%, or $ 23 trillion, by 2050 compared to a climate-free world.The public and private sectors are currently competing to halve CO emissions2 However, many of the technological advances needed to combat global warming pose new risks or change existing ones.

As a company’s core production process evolves accordingly, traditional underwriting may continue to play a key role in addressing Scope 1 emission barriers. However, the challenges posed by Scope 2 and 3 emissions may require a more sophisticated approach and may increase the demand for innovative solutions.

Parametric insurance transforms the approach to risk transfer

Based on a predefined index and a pre-agreed payment structure, parametric hedging guarantees payment transparency and speed, solving uncertainty and liquidity issues.
For example, NatCat’s parametric coverage has increased in recent years due to its wealth of data on natural disasters (NatCat) and its extensive expertise both inside and outside the insurance industry.

But does this also apply to these new risks associated with energy transformations, supply chain disruptions, data digitization, or CSR-related requirements? Previously, if you had data, you could have parametric insurance, but what if you don’t have historical data?
By definition, new technologies and innovations are accompanied by a lack of historical data. In these particular cases, there is no basis for a retrospective approach that combines exposure and experience. Therefore, there is an increasing need for non-traditional and positive perspectives.

“In this situation, full collaboration between the insurance industry and the enterprise is the basis for developing appropriate proposals.” Marco Adamo says.

Is it possible to use the supply amount as an index?
Do sensors and twins open the door to reliable and verifiable data?
What parameters can be used to meet the CSR requirements? What if the vendor fails to reach its Net Zero goal?

There is no correct answer to these questions yet, but regular dialogue between insurers, brokers and insureds is certainly the first step in implementing an innovative approach.
Contact us now for more information on alternative risk transfer solutions that go beyond traditional insurance.

Content provided by Swiss ReCorporate Solutions