Descartes expands parametric solutions beyond cat, with first cyber offering

Demonstrating its appetite to deliver parametric insurance and data-driven risk transfer solutions beyond natural catastrophe, weather and climate risks, specialist Descartes Underwriting has launched its first parametric cyber offering.

The company said today that it intends to build on its successful parametric offerings, which have been naturally focused on catastrophe related risks, to offer solutions for other hard to insure and emerging areas of risk.

The first of these is cyber attacks, with the launch of a parametric cyber solution in France, targeted at small and medium-sized businesses, especially in the manufacturing and retail sectors.

Descartes Underwriting has created its own proprietary cyber risk model and intends for the new parametric cyber insurance product to follow its established data-driven approach.

The company notes that the target sectors in France face increased risk of ransomware attacks, so Descartes’ new parametric cover can address the concerns of finance and information system security departments to protect their critical assets in the event of a cyber-attack, covering the cost of direct impact to their information systems, as well as the potentially significant operating losses that can occur due to business interruption.

Tanguy Touffut, co-founder and CEO of Descartes explained, “We build solutions for what is difficult to insure. Since 2018, we have seen that the parametric insurance model is uniquely primed to effectively protect companies against climate risks. We are now looking to apply this know-how to one of the other major threats facing businesses: cyber risk.”

“Our research team – which is constantly expanding – is also working on other sectors that can be better covered thanks to increasing data advancements,” Kevin Dedieu, co-founder and Chief R&D Officer of Descartes further stated.

The company said that the launch of this parametric Cyber Shutdown Cover solution shows that Descartes is “demonstrating its ambition to gradually extend its scope to emerging risks beyond just natural hazards.”

CEO Touffut added, “Data and algorithms are at the heart of our business model. This is a momentous milestone for our company, as it marks the beginning of entry into new verticals linked to emerging risks.”

Descates notes that a ransomware attack can result in an average 21-day business shutdown, which can drive an estimated daily operating loss of €800,000.

The parametric insurance company will now mobilise its expertise in parametric models to cybersecurity, by assessing a clients’ vulnerability upstream, and defining upfront with the customer and broker a compensation amount per-day of business interruption.

Because of this, the proposed cyber insurance policy can offer coverage adapted to the financial cost of business shutdown, customised to match a policyholder’s profile, with the possibility of being compensated rapidly after a cyber attack occurs.

“Thanks to our parametric models, we help customers calculate the amount of their financial losses in the event of business interruption, as soon as they take out the policy. This predefined parameter, combined with a very simple contract, enables us to intervene immediately after the attack. Thus drastically reducing its impact, especially considering that we can compensate our customers within 3 weeks of the resumption of activities, when traditional insurance requires several months before confirming coverage levels,” explained Louis Bollaert, Chief Commercial and Marketing Officer at Descartes. “In a world turned upside down by climate change and the emergence of new risks, our ambition is to take 5% of the French cyber insurance market within the next 18 months.”

“With the upcoming implementation in October 2024 of the NIS2 directive which aims to strengthen the cyber maturity of European companies, Descartes’ Cyber Shutdown Cover provides unequipped businesses with an innovative solution tailored to their key assets. This model is also relevant for companies that have already been the target of attacks. In fact, Descartes’ Cyber Shutdown Cover supports businesses that have suffered a loss in the last 18 months. Unlike traditional models, we enhance the value of the cybersecurity investments made following an attack, by directly reflecting mitigation measures in the design of the cover offered,” added Léopold Larios, Cyber Director at Descartes.

This marks the first expansion of parametrics into specialty lines of insurance business for Descartes and we suspect there could be more to come, as adopting a data-driven approach to understanding exposures and the potential financial impacts they can drive, means opportunities to construct parametric triggers can be found.

For Descartes Underwriting as a whole, 2024 sees the company looking to grow, with an ambition to increase its premiums by more than 50%, to well in excess of 200 million, with over one-third coming from the United States.

The longer-term target is for Descartes Underwriting to reach 500 million in annual premiums in the next few years. An ambitious goal, but with expansion into writing new lines of business in parametric form, there is every chance these goals are achievable.