SUSTAINABILITY
So how might parametric insurance models , like those used by FloodFlash , offer more effective solutions for managing climate-related risks compared to traditional insurance models ?
The growing demand and positive market reception underscore the effectiveness of such solutions . In a recent funding round , FloodFlash raised US $ 15 mn to expand its operations , and some studies show that parametric insurance products like FloodFlash can result in claims cost savings of up to 30 % compared to traditional indemnity insurance .
Long-term impacts , multiyear coverage – and you “ The challenge with most insurance , conventional or parametric , is the short-term nature of coverage ,” says Martin Sarjeant , Head of Risk Solutions and Climate Risk at FIS . “ Both types of insurance are great for in-policy-year protection but have limitations when it comes to the longer-term impacts from climate change .
“ With home insurance , the insurer can reset the cost each year if the risk changes . At renewal , the insurer will change the rates offered in line with prior years ’ experiences and their perception of the current year ’ s risks and expenses . The policyholder can also look for alternatives ,” continues Martin .
As we witness an increase in climate events and climate-related claims , premiums will rise . Therefore , insurers are not really offering homeowners longterm protection against climate change or certainty in their insurance premiums ( or indeed access to insurance ) going forward .
“ As we witness an increase in climate events and climaterelated claims , premiums will rise ”
MARTIN SARJEANT HEAD OF RISK SOLUTIONS AND CLIMATE RISK , FIS
160 September 2024