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Precise Parametric Insurance Boosts Your Return in a Changing Climate

What if there was a superior parametric insurance product that paid whenever you needed it, and was also available at a lower premium than traditional insurance? This powerful combination significantly increases your company’s return on capital (ROC). Learn how Metryc, from Reask, makes this experience possible.

What is Metryc?

Metryc is a network of 200’000’000 anemometers, evenly distributed over the earth, each kilometer to ensure that wind speeds at location level are captured.

It would take decades to install these and they would also not reliably measure the intensity of tropical cyclones, as they often break during storms. Which is why Metryc is indeed a virtual network that consistently and reliably captures every peak wind globally, back to 1945.

Metryc leverages advanced science and machine learning to build an accurate tropical cyclone model to address both pre-event pricing and post-event payout calculations.

Why is Metryc superior?

With Metryc, no storm event can go unnoticed, unlike “cat in a box” policies. We measure wind speed at location level, eliminating the risk of missing a storm event, a common concern with conventional “cat in a box” covers.

The premium calculated by Metryc reflects only the intensity and probability of winds at the covered location, unlike “cat in a box” that covers all storms equally within the box or circle, regardless of how far away they are from the location. Hence, our approach makes the premium fully risk-adequate and hence much more cost-effective and affordable than “cat in a box” covers.

Metryc makes first generation “cat in a box” policies look antiquated, by significantly reducing both premium and basis risk – the risk that an actual loss occurs but the insurance company does not pay because the cover was not triggered.

Metryc use case: A Florida hotel during Hurricane Ian

Fighting against windmills – A circle with a 50 km radius looks small compared to Hurricane Ian. Source: Nasa

To understand  Metryc’s impact, let’s take a hypothetical beachfront hotel close to Tampa in Florida and couple it with a real event: Hurricane Ian making landfall 120km further south in September 2022.

A “cat in a circle” policy with the largest circle with a radius of 50 km around the hotel would not have triggered a payout as the track did not enter the circle. However, the policy still charged a premium of $300,000.

Now, let’s consider the same scenario with Metryc. Hurricane Ian triggered a partial payout because Metryc could identify winds at the location that still corresponded to Category 1 intensity according to the Saffir-Simpson Hurricane Scale. Such intensities typically generate more clean-up costs and non-damage business interruption losses than direct damages to the building itself, which are perfectly addressed by this partial payout. Moreover, thanks to its lower premium, $200,000 annually, the situation looks completely different with Metryc.

See a simplified comparative financial performance analysis of the two different parametric covers for the scenario above as per 31.12.2022, figures in mUSD:

Note: The figures shown here are based on different structures than the ones shown in the video clip mentioned below.

As the table above illustrates, Metryc not only more than doubled its net income, but also its ROC, compared to the traditional “cat in a box” approach.

This example shows us that Metryc is a more precise and efficient insurance coverage that protects businesses and contributes to stronger financial performance, as evidenced by the higher ROC.

Historical perfomance

Want to see how this hypothetical hotel would have performed in the past for the two types of structures? Watch my back-testing video:

The future of parametric insurance is here with Metryc – swap approximation for accuracy and boost your ROC with a more robust and risk-adequate product.

Get in touch to see Reask’s parametric solution in action and learn how you can lower basis risk while providing cost-effective parametric cover for your own business or for your clients, right now:

Disclaimer: The scenario presented in this analysis, including the location, figures, and comparisons, are entirely hypothetical and created solely for illustrative purposes. While the objective is to demonstrate potential performance differences, these examples are not intended to represent or guarantee that similar results will occur in real-life situations. The information should not be relied upon as financial advice or be used for decision-making purposes without consultation with a qualified professional. It is highly recommended that anyone seeking insurance coverage consult with an insurance professional to discuss their specific needs and circumstances.

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