Sid Jha, Founder & CEO of Arbol, discusses the benefits of parametric insurance over traditional methods, its diverse applications in industries like agriculture and energy, and the challenges in managing risk in less liquid markets. The conversation also covers Arbel's future plans after a successful funding round.
Traditional insurance struggles with climate-related damages, highlighting the need for a more objective approach.
Parametric insurance simplifies claims process, offering solutions for global risks and engaging alternative capital providers.
Deep dives
Challenges in Traditional Insurance Assessment
Assessing climate-related damages reveals a lack of insurance coverage due to delays, disputes, and fraud stemming from subjective loss evaluations. Traditional insurance methods struggle to provide adequate coverage for the majority of climate damages, highlighting a need for a more objective approach.
Parametric Insurance Advantages
Parametric insurance, with its data-triggered financial product, enhances balance between insurers and the insured by using objective parameters for payouts. This approach simplifies the claims process and reduces delays, disputes, and fraud commonly associated with traditional insurance assessments, marking a shift towards more efficient risk management.
Expanding Scope of Parametric Insurance
Parametric insurance broadens beyond localized catastrophes like hurricanes and droughts to address global risks affecting various industries. By offering coverage for non-localized and regional damages, parametric insurance provides solutions for supply chain disruptions in industries like energy and agriculture, adapting to diverse risk profiles and market dynamics.
Alternative Capital in Parametric Insurance
Parametric insurance opens opportunities for alternative capital providers, distinct from traditional reinsurers, to engage in risk transfer mechanisms. This approach enables insurers to access diversified capital pools, enhancing their risk management capabilities and resilience in the face of climate-related risks, leading to greater market participation and risk mitigation.
We continue our Carbon Frontiers 2024 series this week with Sid Jha, Founder & CEO of Arbol. SmarterMarkets™ host David Greely sits down with Sid to discuss his work building parametric insurance markets to help manage the risks created by a changing climate.
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