What could the future hold
POSITIVE REGULATORY ATTITUDES KEY
we understand that parametric insurance regulations are in development which will speed adoption of parametric products. Meanwhile the Chinese government is in the process of setting up the Shanghai Insurance Exchange to facilitate access to agricultural insurance products including those that utilise parametric triggers. Although it is relatively early days, it is hoped that the exchange will become a hub for (re)insurers and an important platform for risk transfer. Meanwhile, Singapore is not especially vulnerable to natural disasters and does not have an extensive agricultural industry, so is unlikely to invest itself in many of the currently available parametric products, however it is a logical place for a regional insurer to set up operations and take advantage of an open and flexible regulatory environment. For example, the insurtech start-up, Asia Risk Transfer Solutions has set up operations in Singapore with the aim of providing disaster protection solutions, including parametric insurance, to people and businesses in China and India.
Regulators around the world have a key role to play in encouraging this type of insurance product innovation, which can in turn help to close the protection gap and increase global resilience. In the UK, the Financial Conduct Authority has brought parametric insurance within its regulatory “sandbox”. For example, Floodflash – an event-based flood insurance – is currently in its development stage and was selected as part of 2017 Cohort 2 of the regulatory sandbox in June 2017. Floodflash is designed to pay a pre-agreed settlement as soon as the company’s sensor detects that flood waters have exceeded a certain depth: essentially a parametric trigger with a direct, local dataset directly reflecting the experience on the ground. In China all parametric insurance products must currently be approved by the regulator on a case-by-case basis. However,
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