1. The probability of the event risk across a range of different magnitudes
2. The factors in place that may mitigate risk (risk mapping)
3. The potential losses from physical as well as non physical damage to the insured’s assets
4. The contingent losses that may occur in addition to direct losses to the insured from physical or non physical damage to the site. Such contingent losses could include employees, suppliers or customers being unable to get to the site or simply a decline in demand for the products produced/services provided due to wide spread damage to customers economic uncertainty or drop in income.
Most insurers fail to provide tailored insurance policies that protect against losses from 3 and 4.
The dramatic growth in parametric insurance and Cat Bonds has been based on insurance buyers preferring protection covering a wide range of possible losses WITHOUT having to deal with the complexity of the traditonal loss submission and the many months of delay and argument with brokers and insurers over what might be paid.
Parametric insurance or a Cat Bond pays automatically within 30 days of a loss submission once the pre-agreed magnitude of the risk event is reached.
Finally insureds can receive certain and timely payment for a far broader range of losses. It remains a mystery to me why more insureds do not buy such protection.
Answers & Comments
Answer: and explanation:
Actually you need to estimate four things:
1. The probability of the event risk across a range of different magnitudes
2. The factors in place that may mitigate risk (risk mapping)
3. The potential losses from physical as well as non physical damage to the insured’s assets
4. The contingent losses that may occur in addition to direct losses to the insured from physical or non physical damage to the site. Such contingent losses could include employees, suppliers or customers being unable to get to the site or simply a decline in demand for the products produced/services provided due to wide spread damage to customers economic uncertainty or drop in income.
Most insurers fail to provide tailored insurance policies that protect against losses from 3 and 4.
The dramatic growth in parametric insurance and Cat Bonds has been based on insurance buyers preferring protection covering a wide range of possible losses WITHOUT having to deal with the complexity of the traditonal loss submission and the many months of delay and argument with brokers and insurers over what might be paid.
Parametric insurance or a Cat Bond pays automatically within 30 days of a loss submission once the pre-agreed magnitude of the risk event is reached.
Finally insureds can receive certain and timely payment for a far broader range of losses. It remains a mystery to me why more insureds do not buy such protection.