Weather Index
Modelling and pricing parametric weather insurance
We model the hazard, the exposure and the basis risk, and derive the price through an auditable and transparent approach.
How the cover works
A parametric insurance pays out on a measured index rather than an assessed loss, which means claims settle faster than under traditional indemnity-based cover. The value of this insurance depends on how closely the index tracks the real loss. We provide the modelling, the pricing and an independent recommendation, so you can launch with confidence.
For
Insurers, MGAs and reinsurers launching or reviewing parametric lines; corporates and public bodies with weather-exposed budgets.
What we model
- Hazard: rainfall, temperature, wind and solar indices at each site, with trends and fitted extremes.
- Exposure and damage: client schedules or open exposure models, with published damage curves or curves fitted on the client's losses.
- Basis risk: The risk associated with underestimating or overestimating the loss.
- Accumulation: how much risk a parametric portfolio is exposed to.
- Climate change: each structure rerun under IPCC warming scenarios.
Perils and their indices
| Peril | Typical index |
|---|---|
| Flood and extreme rainfall | Daily or multi-day rainfall |
| Windstorm and cyclone | Wind speed at the site |
| Heatwave | Days or degree-days above a threshold |
| Cold spell | Minimum temperature |
| Drought | Rainfall deficit or soil moisture |
| Renewable output | Solar irradiance or wind speed |
What it gives the underwriters
- Structure options: triggers, exits, payout shapes and limits.
- Technical price and risk profile: expected loss, premium, rate on line, exceedance curves and probable maximum loss.
- Capital and reinsurance: Solvency II, reinsurance layer.
- Backtest and recommendation: past payouts against actual losses, and the terms we recommend.
- Portfolio: how programmes accumulate and diversify, and the capital the book needs.