Group 8

Parametric Insurance Case Study: Sargassum Impacts for Hotel

Client Need: An all-inclusive luxury resort on the Mexican Riviera has faced significant economic impacts due to the increased prevalence of sargassum inundation on the hotel’s private beach. During sargassum events, the client is forced to close beach access and cancel all beach front activities, comprising 30% of average weekly revenue during peak season. Removal from the 250m beach costs around $100K per event and requires specialized treatment and immediate attention due to the algae’s toxicity. 

Pain Point: Factoring in the lost revenue from extensive booking cancellations by guests unwilling to spend their holidays without beach access, the client has absorbed 1.5M in financial loss during years with multiple sargassum events. With no way to mitigate this loss with an existing traditional insurance product, the hotel seeks an alternative solution.

Our Solution: A parametric cover against financial loss due to sargassum. Together with the client & their broker, we agree on the amount they will receive if satellite-detected sargassum concentration exceeds a certain threshold in the ocean just in front of their resort. 

The Result: The exposure is monitored in real-time with a monthly payout if the concentration of sargassum triggers the policy. With the certainty of quick liquidity in the event of excess sargassum, the resort now has the means to more seamlessly pay for removal costs, refund clients, or invest in algae collecting nets.

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