WTW’s Young targets further parametric launches as momentum builds
Momentum is continuing to build around the development of parametric covers for climate-related risks with several projects currently underway, according to WTW’s Simon Young.
Young, senior director, disaster risk finance and parametrics at WTW’s Climate and Resilience Hub, told ESG Insurer the broker is currently working on a number of projects around the world which are creating and testing innovative use-cases for parametric insurance, particularly against climate risks.
The WTW team has been responsible for several innovative products in recent years, including the Mesoamerican Reef Insurance Program – which expanded again at its 1 June renewal – and the parametric “cat wrapper” to provide the government of Belize with cover for sovereign loan repayments after hurricane events.
“We also developed and put in place a reef coverage for The Nature Conservancy in Hawaii last year and are planning to incept a reef coverage for a client in Fiji in the final quarter of this year,” Young said.
“Momentum is definitely building, but we have not yet put in place another resilience wrapper for sovereign debt issuance,” he continued. “However, we hope to be announcing by the end of the year funding for a project to develop the resilience wrapper concept for private sector adaptation investments being made by a major development finance institution.”
In addition, he highlighted the potential value in applying parametric solutions to manage the risk of nature-based carbon sequestration being interrupted by climate hazard impacts – for example, a cyclone damaging mangroves and reducing their carbon sequestration rate.
“We have a couple of projects about to start which are intended to further develop this concept at both the macro and individual investment scale,” he said.
The latest plans follow a series of recent initiatives developed by the WTW team, including a four-peril parametric insurance solution to unlock financing for aquaculture development in Sri Lanka, designed and placed by the broker on behalf of Taprobane Seafood Group, Sri Lanka’s largest seafood company.
In May this year, WTW launched a nitrogen risk insurance product in Queensland, Australia, which covers the risk of yield shortfall from reduced applications of nitrogen fertiliser on ratoon crops.
“Reducing fertiliser use saves input costs for sugar cane farmers, as well as having positive environmental impacts through reduction in nitrogen run-off, which will be particularly impactful along the Great Barrier Reef,” Young said.
WTW has also been working with the charity Rare, with financial support from the UK’s Blue Planet Fund and the government of Canada via the Ocean Risk and Resilience Action Alliance, to pilot a parametric insurance solution for fishers in the Philippines to combat income losses from prolonged periods of adverse weather which prevent safe fishing.
“It is hoped that the pilot will launch for 2024, and we have been developing similar programmes in Indonesia, several Pacific islands and in the Caribbean,” Young said.
WTW also launched a program with Unicef – the Today and Tomorrow Initiative – at the end of last year which includes a child-focused parametric risk transfer program designed to provide fast and dependable funding to be deployed by Unicef in-country teams following tropical cyclones in eight pilot countries across four cyclone basins.