Group 8

Parametric Insurance Case Study: Tornado

Client Need: A Tornado Alley adjacent low-hazard construction materials manufacturer felt mistreated by a hardening property market and elected to seek coverage only for catastrophic weather events. Their broker approached Descartes Underwriting to discuss parametric tornado coverage.

Pain Point: Unable to diversify their geographic risk, the client’s entire manufacturing capacity was highly concentrated and exposed to convective storms and the tornadoes which sometimes form as a result. A direct tornado strike to any of the clustered facilities or their associated storage yards would lead to severe business disruption and economic hardship.

Our Solution: Descartes’ parametric tornado coverage provides a near immediate and highly flexible response to tornado outbreaks. We worked with the broker to design an index which responded to the client’s exact exposure as it scaled with tornado proximity and strength. The client was able to custom build a policy which would secure their cash flow if one or more of their facilities were to be hit by a tornado. Descartes is able to guarantee claims proceeds are delivered to the client within 10 days of receiving a statement of loss.