LM Re announces world-first parametric reinsurance treaty for earthquake risk

LM Re announces world-first parametric reinsurance treaty for earthquake risk | Insurance Business Asia

Catastrophe & Flood

LM Re announces world-first parametric reinsurance treaty for earthquake risk

Collaboration hailed as a new era for disaster risk management

Catastrophe & Flood

By
Kenneth Araullo

Liberty Mutual Reinsurance (LM Re), in collaboration with managing general agent (MGA) XS Global and technology provider Safehub, has introduced the world’s first sensor-based, parametric reinsurance treaty designed for earthquake risk.

LM Re has touted this development as a new era for disaster risk management, offering insurance companies, risk managers, and policyholders access to real-time, building-specific sensor data.

As part of the collaboration, Safehub provides smartphone-sized sensors that are installed in individual properties to precisely measure ground shaking, thus reducing basis risk and expediting claims payments. The initial distribution of multiple policies through XS Global subsidiaries in Mexico will leverage Safehub’s innovative sensor technology.

Mexico, being in a seismically active region, and with Mexico City as the most populous city in Latin America, faces significant earthquake risk. Accurate measurement of ground shaking is heavily influenced by local soil conditions and necessitates sensors placed within properties.

Unlike this new treaty, traditional parametric policies have historically relied on triggers based on proximity to the epicentre and regional estimates of earthquake intensity, both of which can result in substantial basis risk.

“A sensor-based, parametric trigger earthquake policy delivers accurate, efficient and direct claims payouts and simplifies processes for policyholders, brokers and insurers alike”, LM Re president Dieter Winkel said. “Delivering exceptional client service through every tool at our disposal, including this kind of cutting-edge technology, is central to LM Re’s mission and mutual values. We are delighted to be working with the professional and innovative teams at Safehub and XS Global to deliver this groundbreaking policy to the Mexican market”.

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