In this video interview with Insurance Asia News, Jeremy Waite, Head of Catastrophe Advisory, Asia Pacific, joins Si Si He, Head of Alternative Risk Transfer for Marsh Asia, to talk about how parametric covers can help in the development of alternative energy infrastructure. Guy Carpenter and Marsh are both businesses of Marsh McLennan.
“The renewable energy sector in Asia Pacific is going through massive growth,” Jeremy said. “What may happen is developers may face challenges finding insurance coverage for these risks, for several reasons.”
Jeremy explains how insurers are stepping away from natural perils coverage, raising retentions and pricing, while changing terms and conditions. Given that renewable energy technology is still new and evolving, these facilities lack traditional loss histories, which makes it harder for insurers to compare what a model might say with what the actual risk might be.
“So that leaves a gap for parametric insurance, which is simpler in some ways in that it’s being defined by a simple parameter, which is sort of the lead measure of a peril,” he continues. “There’s currently about 8 to 9 insurers writing parametric insurance, which has doubled significantly, probably over the past 3 to 5 years.”
Jeremy goes on to remind lenders and owners of renewable infrastructure to keep in mind the concepts and science behind parametrics, such as the triggers that activate payouts, which are predetermined. It’s also important for policyholders to keep in mind that parametrics are designed to complement, not replace, traditional insurance programs.
Click image below to watch the interview