Wildfire risk is increasing in many parts of the world, with significant exposure impacts on the forestry, vineyards, high-value agriculture, pulp & paper industries, as well as the public sector.
Our parametric approach towildfire risk
Descartes’ parametric solutions offer a new form of resilience to wildfire. Customized precisely to clients’ exposure needs, we cover the whole risk season with a straight-forward, satellite based solution.
Our parametric wildfire product is structured using a combination of satellite imagery, long-term climate, and weather data. We develop an index calibrated to historical wildfire impact and the distribution of value across the property or areas insured.
Then, together we agree on the value per hectare and corresponding indemnity up front. Clients can be certain of what they will receive in the event of wildfires throughout the risk period, with simple and transparent structures based solely on the number of hectares burnt, and no ‘small wildfire’ exclusions.
Client Need: A large pulp and paper company in the US carried significant wildfire exposure at their plantations and production facilities.
Pain Point: In a previous fire season the company suffered large losses in which their traditional policy counted and applied the deductible to each part of a fire as if it was an individual event. This significantly reduced the payout that the company received compared to losses incurred, a 25M USD difference.
Our Solution: A parametric wildfire cover, customized to the client’s precise and risk transfer needs, that closes the gap between expected and actual indemnity. Together with the client & their broker, we agreed on the amount they will receive if satellite-detected burned area exceeds a certain threshold at identified plantation locations.
The Result: At the end of the season, losses were computed transparently, with objective data and the client seamlessly received the expected payout as determined by the index.