Parametric insurance specialist Descartes aims to unlock further growth in the local market by targeting brokers still not across alternative risk transfer, as the soft market creates opportunities.

During a visit to Australia, chief insurance officer and co-founder Sebastien Piguet told insuranceNEWS.com.au awareness has improved among larger brokers, but a broader education push remains essential.

“More and more brokers are becoming familiar with parametric insurance ... it has become mainstream,” he said. “But there is still a lot of work to do with brokers that are not necessarily familiar with parametric or alternative risk transfer.”

Parametric insurance can be more efficient and provide greater certainty than traditional cover because pre-agreed sums are paid out when certain weather triggers are hit, removing the need for lengthy assessments of loss and reducing the likelihood of claim disputes.

Mr Piguet says rather than a replacement solution, parametric insurance is usually complementary, and can fill gaps left by traditional cover.

“Parametric can cover risks that are sometimes excluded by traditional policies, for example, non-damage business interruption,” he said. “Because the cover is based on an index that we design with the client and the broker, it can access different things.”

This flexibility is a key selling point for intermediaries, and Mr Piguet believes softening market conditions are encouraging broker-led innovation rather than suppressing it.

“In a hard market, you are selling capacity and the product matters less,” he said. “In a soft market, capacity is available, so you need to convince clients with good products. That accelerates innovation.

“We are seeing more and more clients who are able to invest the savings they are generating on their traditional placement into improvements of the program with parametric insurance.”

Looking ahead, Descartes sees further opportunity for brokers to use parametrics, including in construction, wildfire-triggered property solutions and cyber business interruption products with pre-agreed daily payouts.

Paris-headquartered Descartes’ global growth is running at about 20%-30% annually, and it expects Australia to follow a similar trajectory.

“At the moment, we are still growing fast and I don’t see it stopping,” Mr Piguet said. “We are exploring new segments and new territories, and unfortunately climate change is still happening, and there is a constant need to find new solutions.”