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“The stock is destroyed, we’ve lost everything. We don’t have insurance; we were refused after the floods in 2012. It would cost us £10,000 a year plus £20,000 for excess.”

That’s a quote from a distraught small business owner whose comic book shop in Hebden Bridge, West Yorkshire, was inundated by the Boxing Day floods that devastated northern England in 2015. Four months later, still one third of the town’s businesses remained shuttered.

When the waters stirred up by the sequential storms Eva, Desmond and Frank finally subsided, victims across the region were left counting the cost in the billions. Some in Hebden Bridge gave up and moved out. Others figured that the chances of a ‘one in 100-year’ event hitting again in their lifetime was remote and soldiered on. They were wrong: in 2021, Storm Ciara rolled in, causing the fourth major flood in their valley in just eight years.

No matter where they occur in the world, the emotional and financial impact of extreme weather events is severe. And, according to risk modelling experts, the human and economic cost of such disasters is increasing, as rising sea levels and drought increase the frequency and severity of flooding and wildfires.

On any day of the week, the United Nation’s global disaster map pulses with climate-related emergencies – the majority among populations with the least access to financial products that could protect them against the worst happening.

Their vulnerability to weather events that are driven by global warming, which is caused mostly by richer nations, led the G7 to launch Global Shield at the recent COP 27 climate talks in November, a plan to provide such countries with pre-arranged insurance and disaster protection funding.

What a Karachi tailor who’s seen his workshop swept away by deadly monsoons in Pakistan and a comic book trader standing knee-deep in sludge in West Yorkshire want most, of course, is affordable insurance that pays out instantly so they can get their lives back on track. And one way that could be achieved is through parametric technology.

Parametric insurance was born in the late 1990s, but leaders in the insurance space didn’t fully start to offer coverage until the early 2000s when AXA, Swiss RE and

Munich Re began to provide policies that paid out according to set limits as soon as a prespecified trigger was met, regardless of the actual loss.

“One of the most exciting things about parametric insurance is the straightforwardness of the claims process,” says Phil McGriskin, co-founder and CEO of Vitesse, a payment provider that bridges the gap between the insurer and customer by offering a range of payment options –including across borders in multiple local currencies – and helps shorten the payout time from months to a matter of hours.

“Since claims are paid automatically upon verifying that a trigger has been met, insurers are reducing costs related to a claims settlement. In a lot of cases, there is no need to send an adjuster out to inspect damage or to waste employee resources in administrative tasks associated with loss adjustment,” continues McGriskin.

“This is a huge cost saving that can be passed on to the consumer. This opens up access to cheaper insurance, which is key to supporting vulnerable communities.”

In December 2022, Vitesse partnered with climate risk insurance platform and Lloyd’s of London coverholder Yokahu,

– which had launched its first parametric hurricane insurance in the Caribbean islands seven months earlier – and parametric insurtech FloodFlash. The latter combines computer models, the Cloud and the Internet of Things to provide cover to businesses specifically at risk of flooding.

“Almost every country in the world has a flood under-insurance problem,” says McGriskin. “In 2021, this amounted to $82billion in global losses, which is almost a third of all economic losses due to natural disasters. Clear and defined parameters in parametric policies mean customers know what is and is not covered; in a time of stress and crisis, this gives them clarity and comfort in what they will be able to claim for. It also gives the underwriter the ability to know their client needs them and that it’s time for them to step into action and help. And that’s where we come in.”

In May 2016, nearly 18 months after the floods that devastated Hebden Bridge, the Association of British Insurers gave an update on how many of those who had cover and who claimed had been paid. Fifteen per cent were still waiting.

“Ninety per cent of small companies fail within a year if they cannot resume operations within five days,” says McGriskin. “To get their customers back on their feet, insurers need to be able to process the claim and make that payment, as quickly as possible.”

Vitesse’s first experience of paying a full commercial flood claim under parametric insurance followed Storm Franklin, which hit the UK in early 2022.

“Measuring not from claim submitted to claim approved – which is how most insurers would measure it – but from water hitting their client’s building to cash hitting their bank account, we achieved a payout for them in five hours and 36 minutes. That makes a material difference to the survival of a business,” says McGriskin.

“Processing cash through the market can be a fairly convoluted process, but through more efficient treasury processing we’re able to ensure there’s the right money, in the right place, at the right time. We can pull funding down from those pots of cash instantly, every time, to service a claim.

“Giving insurers a single platform in which to manage and process payments to reach small business owners within 24 hours, helps people, businesses and communities recover from catastrophe quicker.” are harder to come by and a welcome holiday could be marred by a cancelled flight. An insurer can provide cover to activate upon cancellation so the insured can purchase a return flight home without worrying about how they pay for it.

Parametric cover isn’t all about headline-grabbing weather events –although it’s clearly where it can have the most profound impact. Increasingly, the technology is dramatically improving the customer experience in more everyday situations that are faced by both businesses and consumers.

“Parametric providers have been focussed on insuring natural catastrophes, as they’re easy to monitor and confirm something’s happened. You can put up a flood or wind monitor, and you know that, once a limit has been exceeded, a certain amount of damage will have been done. But now we are seeing parametric insurance being used more and more in vehicle and travel insurance, and beyond,” says McGriskin.

“Such parametric covers are quite closely twinned with embedded finance. And I still think that has a long way to run. As we do more and more online, the ability to tick a box to have what you’ve just bought covered for a small price is very appealing. And having that one-click digital experience replicated across the claims process, right the way through to payment, is how you win the market.”

As a paytech, Vitesse made its mark by offering a single connection to a network of domestic clearing systems for insurers, financial services companies, e-commerce and other corporates, landing full value payments as quickly as possible with the payee, while also giving its clients a simple, real-time view of their global liquidity.

“Software is intrinsic to the process because it allows everything to happen in real time,” says McGriskin. “Parametric covers rely on businesses like McKenzie Intelligence Services, a software provider that taps into data sources that will allow parametric providers to understand where in the world a problem is occurring, how severe it is, and to what extent the goods that they have covered are damaged.

“A lot of vehicles being sold now will be fitted with onitoring systems that record if the vehicle is damaged somehow. The claim will be initiated by the car’s systems and sent off to the manufacturer or the insurance provider. It's paid and settled without the driver having to get involved, which is great for the driver's insurance experience and for the manufacturers themselves because it keeps the customer within their dealer/ repair network, keeping their costs leaner.

“Parametrics also feed down into the travel space, which many of us can relate to – I think we all have experienced delays and cancellations across the past couple of years. Companies have seen this pain point and are building covers around that.

“That’s all the more important with the cost-of-living crisis, when disposable funds

“But software also includes payments,” he continues. “It’s about making sure that once you have all of this information and you've made your decision, that you’re not making the customer wait to get their money and that it’s paid in the way that’s going to make the most difference to them.

“It might be a real-time payment to a card or a multimillion dollar-to-peso payment to a bank account in Mexico. You have to make sure you have that in place because there’s no point in saying I can give you a judgement on your claim immediately, but you get your money in two weeks.

“I would like to think Vitesse is getting a bit of a reputation for innovating across the insurance space and we are uniquely placed to do that,” McGriskin adds.

“We’re looking forward to being the payment partner of choice for parametric insurers. To that end, we’ll continue to innovate, bringing real value to our customers and most importantly, to the end consumer.”