Munich Re supports parametric insurance launch in Colombia

A worker picks coffee cherries during harvest in Colombia.
Photographer: Edinson Ivan Arroyo Mora/Bloomberg

Cloud to Street, a climate adaptation company, announced that it will be partnering with San Juan, Puerto Rico-based parametric insurance startup Raincoat, and Munich Re, the world's largest reinsurance agency. The partnership aims to deliver parametric insurance coverage to Colombian farmers who have historically lacked access to traditional indemnity insurance.

In developing countries like Colombia, parametric insurance fills the gap for businesses where socioeconomic and geographic limitations have created roadblocks for traditional insurance underwriters, Peter Lacovara, head of commercial at Cloud to Street, says.

“If you think about how conventional flood insurance is underwritten, you need a lot of information that is really hard to get in the developing world," he explained. "With parametric, you don't need any site-specific information, you just need to understand the likelihood of the event itself. Parametric insurance checks a box in much of the world where flood insurance simply isn't available, because until now, the service has been uneconomical.”

Cloud to Street uses a combination of satellite telemetry and imaging, on-the-ground intelligence, and machine learning to deliver real-time parametric data for insurance providers. Its “flood intelligence” program partners with institutions like NASA to track and monitor floods from space, allowing the company to create 360-degree flood models cheaper and more accurately than previous methods. 

“Our advantage is that we don't operate our own satellites. Satellites are really expensive and if the application isn't right for what you're trying to do, then you're kind of stuck," said Lacovara. “We built this model around using the right sensors for the job which allows us to be more flexible and allows us to have substantially lower costs to support. ”

Cloud to Street’s partnership with satellite providers also gives the company access to more than 30 years of historical data, which in turn helps train the flood intelligence algorithms to make more accurate models. In Colombia, this data has allowed providers such as Raincoat to create comprehensive parametric policies that pay out immediately after a disaster, all without the need for them to file a claim, the companies say.

In the future, Lacovara believes that services like Cloud to Street will not only continue  to grow, but will prove invaluable to consumers in countries hit hardest by climate change.

“Worsening climate change underscores the need to prioritize climate adaptation and financial solutions to support those affected by natural disasters," he concludes. "We couldn’t be prouder to help make insurance protection available to over 100,000 Colombian farmers for the first time, and we’re poised to assist in building similar parametric flood insurance programs worldwide.”

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