Liberty Mutual Re backs first sensor-based parametric quake reinsurance

Liberty Mutual Re, the reinsurance arm of the insurance group, has launched what it terms a first, a new parametric reinsurance treaty for earthquakes that takes its trigger from installed sensor data.

Partnering with MGA XS Global and technology provider Safehub, Liberty Mutual Re says this is the world’s first senor-based, parametric reinsurance treaty for earthquake risk.

Using real-time building-specific sensor data, sourced from smartphone-sized sensors provided by Safehub, the trigger can be calibrated down to building level.

This will more accurately measure the shaking at the site, so minimise basis risk and provide faster payouts, Liberty Mutual Re believes.

The reinsurer expects to sell multiple policies through XS Global subsidiaries in Mexico, utilising Safehub’s revolutionary sensor technology.

The reinsurance firm explains that a more traditional parametric policy might have used proximity to the epicenter and regional estimates of earthquake intensity as triggers, which can result in significant basis risk.

“A sensor-based, parametric trigger earthquake policy delivers accurate, efficient and direct claims payouts and simplifies processes for policyholders, brokers and insurers alike,” explained Dieter Winkel, President, LM Re. “Delivering exceptional client service through every tool at our disposal, including this kind of cutting edge technology, is central to LM Re’s mission and mutual values. We are delighted to be working with the professional and innovative teams at Safehub and XS Global to deliver this groundbreaking policy to the Mexican market”.

Andy Thompson, Co-Founder and CEO of Safehub added, “We are pioneering a pivotal moment in the insurance industry. By combining unparalleled earthquake sensor technology with the expertise of LM Re and the innovative capabilities of XS Global, we are reshaping the landscape of risk management. This collaboration has led to the creation of the world’s first advanced earthquake parametric reinsurance treaty that harnesses the power of real-time building sensor data and cellular networks. Together, we will scale this technology for the benefit of everyone, and in doing so redefine how societies can rebuild and recover in the face of adversity. This marks a significant leap forward in our mission to enhance resilience and support communities worldwide in the face of disaster.”

Alejandro Solorzano, XS Global Parametric Managing Director also said, “Using sensors like Safehub’s earthquake parametric sensor to mitigate basis risk is the future direction of the parametric insurance market. This innovative technology provides real-time alerts during earthquakes, enabling individuals to make informed decisions and potentially save lives. The Safehub earthquake parametric sensor helps people respond effectively in the event of an earthquake and supports better decisions about evacuating buildings.

“Safehub sensors, the latest innovation in low-cost sensor technology, can be used in almost all structures in the private and public sectors. Also, we can deploy hundreds of sensors rapidly if necessary, so this represents a significant advancement towards a more resilient and prepared population in the event of a major earthquake”.

Sensors and the data they provide are set to become key tools and inputs that allow for improved risk transfer product design and development, as well as more responsive outcomes from parametric risk transfer structures.