Page 43 - Insurance Times July 2024

Airport closures due to fog or volcanic eruptions. Road Ahead
Drop in business transaction volume, footfall, hotel Awareness and interest in coverage for NDBI risks have
occupancy levels, or loss of income for gig workers increased following the Covid-19 outbreak. Looking ahead,
following a terror attack, such as a shooting in a specific NDBI is poised to become a significant area of insurance
activity. While businesses are demanding comprehensive all-
area.
risk coverage for NDBI, including all perils and causes,
Disruptions in the supply chain, including shipment insurers are still in the early stages of experimentation. Due
delays, and protection for gig workers and builders to the novelty and innovation involved, the initial coverage
experiencing loss of income after a natural catastrophe. developed by insurers is not comprehensive but rather
focused on specific perils with low limits.
Social or political unrest and consequent government
actions resulting in denial of access to property. As the new-age NDBI policies are tailored to individual
needs, the effectiveness of data sources, parameters, and
Loss of business for water-based theme parks due to
policy wordings remains relatively untested. The true test
droughts and water shortages.
of their efficacy will come when claims arise, particularly in
Loss of attraction for the tourism industry during large numbers. As parametric policies are still in the initial
heatwaves or no snowfall periods. stages, premiums for these tailored contracts may be
relatively higher, where the perceived benefits are
Shortage in renewable electricity output due to lack of outweighed by the premiums. However, as insurers gather
sunlight, wind source volatility, or water shortages. more data on these niche risks, they will be better equipped

Transport disruptions that are caused by port blockages to accurately quantify exposures, refine parametric triggers,
or lower river levels. and reduce premiums.

Technological disruptions such as cloud downtime, Given that providing indemnity-based insurance solutions for
internet disruption, or downtime of third-party IT many NDBI exposures may be financially unfeasible, we can
service providers. expect to see more parametric solutions emerging in this
space. The current parametric structures for NDBI are

The innovation of parametric insurance for NDBI losses has designed with single parametric triggers, however as the
product landscape expands, coverage may evolve to include
only just begun. These early products have seen limited
multiple triggers, stepped payouts and hybrid models that
success and have yet to achieve widespread adoption.
combine elements of both indemnity-based and pure-
However, it can be stated with certainty that in the parametric solutions.
dynamically evolving business and risk landscape, NDBI risks
are likely to find an ideal solution in parametric insurance Reference
contracts. Various sources.

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