Structuring the perfect policy for larger flood risks

Authored by FloodFlash 

The quality of parametric insurance is defined by how well payments and losses match up. We take a look at structuring, one of the tools we use to correlate our payouts with the losses that clients experience better than ever before. 

What is structuring

The best way to think about structuring is as an extra tool that helps your client tailor their policy to meet their needs. Structuring a policy involves several people across the business, primarily Henry Bellwood, who sits across our Underwriting and Pricing team and Distribution teams. Henry and the team use engineering studies, flood risk data, and the client’s own knowledge to create an initial structure for the client. That includes:

Trigger depthsPayout amountsSensor placement

For our UK brokers, this may well sound familiar, as the broad aim of structuring is the same as our portal feature smart quote. Structuring takes the principles of smart quote and applies them to larger and more complex cases.

Which quotes require structuring?

We look at every quote on a case-by-case basis to determine optimal payouts and triggers. In the UK, our smart quote feature helps us to suggest initial triggers, and our Broker Success Team can support the majority of the quotes we see. In the US, our Business Development Managers have a wealth of expertise to support you and your client in optimising for the most efficient cost of risk transfer. For many clients, they will know what they need from their experiences in previous flood events.

Take a restaurant that flooded last year, which now has a full flood exclusion. They will know the costs involved in last year’s flood, where water entered the property, and the heights of equipment that would result in higher damage if flooding reached them. We also have a range of collateral that can support these decisions, such as this video all about sensor placement. 

However, larger and more complex sites have many more factors to consider. A larger site means there are more likely to be variations in elevation and risk which affect sensor placement. They may also have existing insurance coverage in place, or want to retain some of the risk themselves.

What are the benefits of structuring?

Structuring helps us understand the impact that a flood of different depths may have on the business. It also helps us to see where FloodFlash coverage can best support existing coverage. Crucially, in the hard market we are currently in, it is a great tool to align the policy with the client’s budget, while still ensuring they have sufficient protection in the event of a flood. 

As Henry says: ‘Structuring means we can take a complex property, or group of properties, along with their needs, and create a policy that matches those needs closer than ever before. This helps align the financial consequences suffered in a flood event – whether property or equipment damage, contents or business interruption – with the payout they receive.’

Remember, the final trigger depths, payout amounts, and sensor locations are up to your client. However, we are committed to supporting you and your clients as much as possible – from providing materials to help decisions to our structuring tool and client presentations. If you’ve got a complex and hard-to-place flood risk, CLICK HERE, leave a message and youTalk-insurance will pass your enquiry on.