FatTrack sounds like a very hip urban DJ to us at IE mag, but in reality it’s a very rapid method of triggering a payout on Cat insurance, based on weather data. In particualr storm or hurricane event tracking. Here’s the word from Skyline Partners;
Skyline Partners Ltd., the parametric insurance catalyser, and Munich Re, one of the world’s leading providers of risk solutions, reveal that a claim triggered by Hurricane Beryl has been paid to the Jamaican Co-operative Credit Union League (JCCUL). The payment was due under a parametric insurance policy first issued in April 2022, and subsequently renewed by Munich Re. The groundbreaking coverage protects farmers by allowing them to take a payment holiday in the event that extreme weather, a common cause of debilitating crop damage, impairs farmers’ ability to repay micro-loans.
Hurricane Beryl passed very close to the island of Jamaica on 3 July, 2024. Since it did not make landfall, however, many event-triggered insurances did not respond due to the binary nature of their radius, windspeed, and/or minimum pressure triggers. In contrast, Skyline Partners’ unique FatTrack™ trigger mechanism, which responds to the dynamic nature of hurricane events, better reflected conditions on the ground. Payout was therefore due under the Howden-brokered coverage.
FatTrack™-triggered insurances pay varying proportions of their total limit according to the number of insured location-tiles hit by the broad swath of the hurricane, and to the hurricane’s category as it enters the tile. Skyline’s reported FatTrack™ paths are calculated from data published by NOAA’s National Hurricane Centre.
In the case of Beryl, 45% of the total JCCUL policy value has been paid. The amount reflects the lower, yet still significant, damage caused by the storm’s close proximity to Jamaican terra firma. It shows how trigger calibration can create parametric insurance products which are well aligned to incurred losses.
“The insurance product responded exactly as intended,” says Skyline’s Co-Founder Laurent Sabatié. “The fact that this policy triggered clearly with a partial payment for Beryl in Jamaica is a strong endorsement of FatTrack for everyone involved – the underwriters, the insured lenders, and of course the beneficiaries. While those covered under industry loss warranties and loss-index-driven cat bonds must wait to learn if their coverage will kick in, we have already paid our insureds.”
“The payment should provide confidence to lenders who require borrowers to secure insurances to protect loan-funded assets, but are not yet comfortable with parametric solutions,” added Skyline’s Co-Founder Gethin Jones. “We are proud to support the Jamaican farming community in a time of terrible crisis. For our clients it shows that parametric insurance need not be a purely pay-or-don’t pay proposition. When parametric is carefully tailored to the exposures, basis risk can be lower than under conventional policies, and its efficiency is undoubtedly very much higher.”
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