Insurance innovation that can ease financial storms this hurricane season

June 1 marks the start of the 2023 Atlantic hurricane season and many institutions who provide forecasts of hurricane activity are calling for a quieter-than-normal season, with fewer than average named storms, hurricanes and major hurricanes (cat 3+).  While on the face of it this seems like good news, those who live, work and have financial interests close to the coast shouldn't be lured into a false sense of security. 

After all, it only takes one hurricane to devastate communities and make a season memorable. Can you name another hurricane in the years 1992, 2012 and 2022 other than Andrew, Sandy and Ian? They may not have occurred in high activity years but the devastation they caused will not quickly be forgotten by those that lived through them. Sadly, lives and livelihoods were lost and communities felt the impact for years.

Therefore, regardless of the forecast, it's imperative for those in hurricane-prone regions to be prepared and financially protect themselves from the devastation and disruption that hurricanes can cause. Financial losses from hurricanes can go beyond the immediate and observable physical damage or lost assets.  Operational revenue losses, decreased employee productivity or upstream supply chain disruption are all significant costs that be incurred in the aftermath of a hurricane but are not included in traditional indemnity insurance coverage. 

But due to improved hurricane observation data and insurance industry innovation, previously uninsurable losses can now be covered. Parametric insurance solutions offered by the industry use reputable measurements of hurricane intensity such as pre determined wind speeds reported at the insured's locations to determine if a payout is due, and if so, how much. From offering clear and succinct policy wording to a rapid and transparent post-event claims processes, these insurance solutions are simple, straightforward risk transfer options that offer proceeds when you need them the most.

Buyers are already seeing the direct benefits of parametric insurance purchases. Utility companies can use them to repair assets that are difficult to insure in the traditional market – AboitizPower in the Philippines was able to fix damaged transmission and distribution lines soon after Typhoon Rai in 2021 thanks to their parametric purchase. Another one of our clients received their payouts for Hurricanes Ian and Nicole last year within just 14 days of the hurricanes making landfall. This quick injection of funds was key to kick-starting their recovery efforts during a difficult and challenging time. 

Before we know it, it'll be August and hurricane season will really be in full swing.  Make your recovery plan today, and leverage all of the instruments that the insurance industry has to offer, including parametric hurricane insurance.