It could become commonplace for captives to buy parametric cover directly for renewables reinsurance, according to Thomas Keist, global captive solutions leader at Swiss Re Corporate Solutions.
“What we can imagine is actually that the captives will buy the parametric solutions, and then the captive will then provide the cover to the prospective insured’s units,” Keist told Captive Intelligence.
“This is something that we have seen being talked about for a long time.”
Parametric solutions are a type of insurance that is triggered when a predefined event occurs, instead of indemnifying actual loss incurred.
They are most commonly used for natural catastrophe events, based on certain category of earthquake or storm, for example, and are detached from an underlying physical asset or piece of infrastructure.
In locations with particularly high natural catastrophe risk, it can be difficult for insureds to get traditional capacity in the renewables market, and parametric cover can be provided as an alternative.
Captive Intelligence recently published a long-read detailing how rate and capacity challenges are prompting greater captive consideration in the renewables market.
“Because it’s difficult to get traditional nat cat capacity for some of these locations, we are often approached with the question of whether it’s possible to provide a parametric coverage,” one anonymous source said.
Faris Nimri, head of renewable energy at Swiss Re Corporate Solutions, said parametric products would be a positive for captives insuring renewable assets to have in addition to traditional insurance “as there’s only a finite amount of capacity there that you can deploy”.
Keist noted that parametric insurance is interesting because it is transparent, and “it has a very quick pay-out, which is very attractive, especially for investors”.
“There are no hidden exclusions and if they have an option for a coverage that actually provides the capacity they want, and it provides a very transparent coverage that pays out quickly, this might be super attractive for them,” he added.