Insurance Journal and MyNewMarkets.com track hundreds of new insurance products and services every year. In 2012, the industry launched numerous new coverages, enhancements, and services focused on a few specific areas: cyber/data breach; cargo theft; and weather. This 2012 new market summary details the product trends in these top three segments, and how insurance companies are responding. (View Part One and Part Two).
#3- Weather-Related Insurance
Even before Superstorm Sandy devastated the Northeast causing billions in insured damages, business interruption and event cancellation losses, insurers were very aware of how weather-related incidents could affect the industry and their insureds. Now more businesses are looking into what insurance is available to them if extreme weather continues to disrupt their revenues, and insurers are ready.
“No one can predict the future with the weather,” says Christian Phillips, contingency underwriter with Beazley’s contingency business team. “That’s what insurance is about and that’s why it is there.”
There are also exposures to businesses that are dependent on the weather.
Golf courses, amusement parks, snow mobile companies, and ski resorts, just to name a few, all rely on certain weather conditions to keep their business up and running. That’s where the weather protection industry comes into play, and a new player in this market is helping main street businesses reduce risks to earning, expenses or revenues from weather-related situations. Metar Weather was formed in 2011 and creates customizable weather protection products for a variety of weather-dependent industries.
Richard Nemet, CEO of Metar Weather in Florhan Park, N.J., says while their products are not catastrophic or property coverage, events like Superstorm Sandy do show business owners how the weather is changing and becoming more volatile from year to year. He says extreme weather variances every year help demonstrate the value of the products they are selling.
Metar Weather has partnered with different weather data firms like Weather Works, and uses national weather stations as well as historical data and the client’s yearly revenue numbers to establish losses and expenses. The premium is determined by the expected claim or loss and the amount the carrier charges to transfer the risk. A portion of the premium is paid back to the client if they have expenses or losses from a below or above average season. “We can create any type of product for any industry given that we have the correct data to price from,” says Nemet.
This year, Metar Weather expanded its weather-related products, as did other carriers:
- Metar Weather now covers snow removal professionals, buyers of snow removal services and ski resort operators in the Northeast, Mid-Atlantic and Midwestern regions. Metar’s products address the income loss snow professionals face from above-average or below-average snowfall seasons. “This year it was 60 degrees in [early] December and it’s getting increasingly warmer [every year] and staying warmer later into the season,” says Nemet, who says snow professionals will lose money because of extreme weather variances and these products can help add some budget certainty for these companies. Metar Weather plans to launch a golf product in early 2013.
- Beazley Weather Guard was launched in March and is a suite of contingency products designed to help clients develop weather-related sales promotions, stabilize revenue or contain costs. The contingency business team specializes in covering the over 70 percent of businesses that are affected by weather risks, and offers event cancellation, non-appearance, and prize indemnity coverage. Weather Guard is powered by a meteorological database of 2,600 weather stations around the world to give clients more information about specific risks at a specific time. Beazley’s weather products are already admitted and filed in the U.S. and the carrier will expand its contingency team to U.S. at the beginning of 2013.
- Endurance Specialty Holdings acquired Galileo Weather Risk Management and has formed Endurance Global Weather. The new unit will focus on weather risk management products to help clients manage the impact of weather variability on their businesses. The new unit will be based in New York City and will establish an operation in London.