Austria
Belgium
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Netherlands
Norway
Poland
Portugal
Spain
Sweden
Switzerland
Turkey
United Kingdom
Australia
Hong Kong
India
Indonesia
Japan
Malaysia
New Zealand
Philippines
Singapore
Thailand
Brazil
Chile
Colombia
Mexico
Peru
Bahrain
Israel
Morocco
UAE
Oman
Tanzania
Parametric Insurance in the River Sector: A Revolution for Risk Management
Published
Read time
Do you know how to protect yourself from decreases in revenue following an excess or lack of water?
The river sector, essential for the transport of goods, the transportation of passengers Cruises, pleasure boats, restaurants, etc. are increasingly facing risks related to weather conditions and extreme events.
Indeed, these last 10 years, the number of climatic events impacting rivers has multiplied, from floods for some rivers to droughts for others. Parametric insurance offers an innovative and effective response to better manage these risks, which are specific to the river sector.
What is Parametric Insurance?
Parametric insurance differs from traditional insurance in that it is not based on an assessment of the actual losses suffered by the insured party, but on a measurable and verifiable parameter defined when the policy is taken out, such as the water level, the speed of the current or the frequency of rainfall. If the parameter is reached (for example, a major flood or drought), the insurer pays a predetermined amount based on the severity of the event, measured using objective data such as that provided by weather stations, sensors or satellites. Loss of turnover without damage is therefore covered.
The advantages of parametric insurance
Responsiveness and speed of compensation
One of the main advantages of parametric insurance is its speed. Unlike traditional insurance, which requires a complex assessment of damages and the intervention of an expert, parametric insurance allows for a quick payout after an event, as soon as the agreed parameter is met. This is crucial in the maritime sector, where unforeseen events can cause major disruptions, such as navigation stoppages or damage to infrastructure.
Cost anticipation
This compensation mechanism makes it easier to plan for the costs incurred by a disaster because the amount of compensation is fixed in advance and directly linked to a measurable event. This allows for simplified financial management and a reduction in the uncertainty associated with disasters.
Climate Risk Insurance
The river sector is particularly vulnerable to climate change, with increased risks of floods, droughts, frost, or storms. Parametric insurance offers tailored coverage, taking into account parameters such as river flow or precipitation levels over a given period. In the event of extreme weather conditions, this insurance can quickly compensate for losses or additional expenses associated with risk management.
Administrative simplicity
Parametric insurance reduces the complexity of administrative procedures. It is no longer necessary to prove the actual losses suffered, which simplifies the claims process. This ease is an asset for river companies that may face unforeseen crises requiring rapid assistance.
Case Studies in the River Sector
1. Flooding
River floods are frequent and devastating events. A parametric insurance contract could be based on pre-established water levels at hydrometric stations.
For example, if the water level exceeds a specific threshold, the policyholder would immediately receive compensation, enabling rapid action to be taken to limit the impact on shipping, port infrastructure and surrounding activities. This compensation could offset the loss of turnover resulting from the impossibility of sailing or access to the quay.
2. Droughts and low flows
Conversely, during periods of drought, low flows in rivers can lead to restrictions on navigation or economic losses due to lower water levels.
In this case, a parametric contract could be triggered by flows below a specified threshold, with a payment intended to cover the additional maintenance or resource management costs incurred.
Conclusion
Parametric insurance Represents a major advancement for the river sector, allowing for more agile and transparent management of climate and environmental risks. Thanks to its quick payment and cost predictability, it offers river companies a valuable tool to secure their activities in the face of uncertainties related to weather conditions. To maximize its benefits, particular attention must be paid to selecting trigger parameters and ensuring that contracts are tailored to the local specificities of river risks.
Howden supports you in defining these parameters to ensure compensation in line with your activity.
Our two teams of specialists in climate risks and river transport risks offer you tailor-made solutions based on our knowledge of the river industry.
Need to know more?
Contact our experts!
Claire Lasserre
Claire Lasserre
Commercial Director of the Maritime and Transport sector
Thomas Valiant
Thomas Valiant
Customer Service Representative