Design and implementation of a parametric insurance cover to mitigate earthquake risk of infrastructure systems

Our experts partnered with a team of experts from Guy Carpenter Inc. to design a resilience-linked product of parametric coverage for transportation networks. One of the many innovations of the product was the explicit calculation of indirect losses (caused by reduced toll collection in the aftermath of a disastrous earthquake event). The end-product can be used as standalone coverage or in combination with other insurance products. In the latter case, the traditional indemnity (which is perceived more accurate and less prone to basis risk) will cover the direct loss, while for the remaining losses a parametric protection mechanism is structured offering transparent, affordable and quick access to economic resources.