Traditional insurance can cover damage caused by extreme events, such as earthquakes or storms, but rarely losses due to "atypical weather conditions" such as a winter being too hot or a summer too rainy.
However, weather and climate changes can have serious repercussions on the economy and human life. New forms of insurance are emerging to help limit the impact of these changes on businesses in mature countries and help improve food safety for people in emerging countries. They combine expertise in data processing, use of satellite imaging and a new economic model.
Providing solutions in areas where traditional insurance fails to deliver
Parametric insurance provides an appropriate response with quick compensation and very low claims administration costs. Payment is triggered if a threshold is reached, for example if fewer than 100 millimeters of rain fall over a given period and for a given crop. There is no need for experts on the spot and payment of compensation is automatic.
Going beyond the borders of insurable risk thanks to Big Data
Until today, parametric insurance was unable to adequately respond to the challenge of food security for technical reasons: the meteorological data used as a trigger remained imprecise, putting risk analysis at stake and limiting the generalization of this type of solution. Developments in the space industry and the data revolution allow to better analyze the basis risk.
Satellite images are able to obtain a resolution of 250 m on average and are expected to reach up to 50 cm in a few years. Simultaneously, we now have data processing methods necessary for processing much more granular and large amounts of data in these images (rainfall, biomass growth, wave height, air quality, ice surface, etc.) As such, it is now possible to offer new solutions to a number of vulnerable industries and to improve their resilience to climate change.
AXA Seed Factory announces its investment in ClimateSecure, a startup specialized in insurance and weather-risk solutions.
Climate change and the increase in "weather anomalies" can impact the food safety for people in emerging countries but also the economic activity of a number of companies in mature markets.
Facing adverse weather at the wrong moment can lead to a 20 to 25% decrease in revenues over a quarter for companies in industries such as energy and tourism.
In partnership with Climpact-Metnext and AXA Corporate Solutions, AXA Seed Factory has created a startup: ClimateSecure. ClimateSecure's aim is to provide tailor-made insurance and weather-risk management solutions to help its clients understand, mitigate and insure financial losses caused by weather anomalies for "weather-sensitive" sectors such as the construction, transportation and agriculture industries. Read the press release to find out more
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