In this interview with Parametric Insurer, Guillermo Franco, Global Head of Catastrophe Risk Research, talks about Guy Carpenter’s research project investigating how the reciprocal exchange model could help support community-based catastrophe insurance on a parametric basis.
Community-based catastrophe insurance is a disaster insurance program arranged by a local government, a quasi-governmental body—such as a special-purpose district—or a community group covering individual properties within the community.
Guillermo goes on to describe how a community-based reciprocal exchange could see community groups design and implement an insurance product for catastrophe risks, which then would be available for community members to purchase. Parametric triggers lead to a straightforward and transparent claims process.
The primary difference between reciprocals and other systems that have been tried is that it involves “active participation of the community,” Guillermo explained.
“The commitment is not made by the town or the city,” he continued. “The commitment is made by the individual but supported by all the work that has been done at the community level.”