Parametric expanding in Africa and ILS markets – GC&C’s Edwards

Generali Global Corporate & Commercial UK’s head of parametric underwriting, Simon Edwards, is candid about his team’s strategic leap into the fast-evolving world of parametric insurance.

“We’re only actually a tiny sliver of Generali, but we’re growing globally across the market space,” he says,

Around five years ago, Edwards (pictured) and his team opted to develop parametric capabilities by partnering with specialist MGA Descartes Underwriting.

“Looking back, I think we made a great choice; they had a core group of really sharp people,” he says.

On 29 April, at this year’s Dubai World Insurance Congress (DWIC), Descartes’ head of client management for Europe, Middle East and Africa, Blanca Berruguete, will address DWIC delegates with a ‘lightning talk’ entitled “Emerging Risk & Opportunity – Parametric Products”, speaking alongside Chris Mackinnon of Lloyd’s.

Parametric insurance pays out based on pre-agreed triggers, often using weather or natural hazard data, rather than on physical loss assessments. The appeal, says Edwards, lies in “rapid injection of capital” to policyholders after an event.

“That’s how it’s working on the construction side,” he explains. “An event happens, and you get quick payment to get the site running again, with subsequent indemnity cover filling in later.”

That dual structure has helped make parametric cover an increasingly common complement to traditional policies.

“It’s certainly complimentary—that’s where it works best,” says Edwards. “At the moment, we’re not seeing it wholesale replacing anything. But we are seeing it fill gaps: high attachment points, non-damage business interruption, and things like delay in start-up.”

He gives the example of a port construction delayed by weather.

“There’s no physical damage, but the work stops. A trigger-based payout helps immediately, even if it’s only a portion of the eventual claim,” he says.

Data, pricing and innovation

Edwards is particularly enthused about what data can now do—and what it might unlock next.

“We’re going to get increasingly wonderful satellite data,” he says. “It’ll have amazing triggers. We’ll be able to monitor hazards and have a brilliant trigger that pays when the data says it should.”

But with that opportunity comes complexity. “We can pay on the trigger—but how do we price the trigger happening? That’s the continuing challenge. We’ve got to model the view of the hazard, not just calibrate it.”

Traditional catastrophe models, he notes, were not built with parametric in mind. “They model hazard, vulnerability, exposure and so on. But then they calibrate everything to past losses. That’s not what we want in parametric—we want clean hazard data, not something adjusted to match history.”

The underwriters in this field, he adds, “need to be more technical than your typical underwriter—closer to natural hazard scientists or data scientists, but with a sales mindset.”

The combination of data sophistication and a straightforward payout message makes the product suitable for emerging and underserved markets as well. Edwards points to Generali’s involvement in providing capacity to a drought risk parametric product with ARC in Malawi, where 80% of the population is involved in agriculture.

“The drought cover there is key for the land, key for the economy. It’s subsidised, and it’s index-based—a single-trigger drought cover. That’s having a real impact,” he says.

ILS appeal

In February, GC&C and Descartes announced the launch of the new Lumyna Twelve Capital Parametric insurance linked securities (ILS) fund aimed at the natural catastrophe re/insurance market.

The two insurance companies described the investment fund as an “innovative…pioneer in the fast-growing ILS market”, as well as a step forward for the GC&C and Descartes partnership.

Parametric structures are attractive to ILS investors, who value their short-tail, quick-settlement nature, Edwards emphasises.

“There is no shorter tail than parametric,” he says. “You can close out the policy a week after expiry, know your returns, and pay your investors. No trapped capital—it’s great.”

Generali has added collateralised reinsurance partners alongside its traditional panel.

“It became more and more apparent that the sort of risks that appeal to us—reasonably risky, high-rate-on-line stuff—also appeal to collateralised markets. That’s where we’re seeing profitable growth,” he says.

Ultimately, says Edwards, the goal is clear: “Our continued challenge is to develop sophisticated covers that minimise basis risk but are still easy to explain to a client. If we don’t do that, we risk losing their trust.”