Parametric reinsurance a beacon in challenging market conditions: Augment Risk

Risk capital and reinsurance solutions broker Augment Risk believes that parametric reinsurance solutions can be a “beacon” in a challenging market environment, providing a valuable addition to the buyers alternative toolkit, alongside catastrophe bonds, industry-loss warranties (ILW’s) and retrocession.

Last year, Augment Risk launched a dedicated parametric risk transfer division, led by former Aon and Inver Re weather and parametrics specialist Kurt Cripps.

The company has set itself a tough goal, to revolutionise reinsurance with a client-focused approach to broking, with alternative solutions such as parametrics a key component.

Augment Risk said it is “championing the progression of parametric reinsurance with its transformative approach,” with improved data availability and sources, alongside a desire for more efficient risk and capital management driving demand.

It’s still considered a relatively “new way of purchasing reinsurance,” the broker notes, but adds that these solutions are “designed to enhance the traditional client operating model through a fast and unrivaled claims recovery process, bringing a new option for peak catastrophe risk.”

The growth of the parametric risk transfer market means solutions are varied and more available than ever before.

“Parametric coverage has never been a more viable and commercial alternative, providing clients the comfort that cat risks are managed most efficiently and cost-effectively,” Augment Risk said.

In particular, the broker sees the use of parametric reinsurance as particularly appropriate in a changing and challenging market environment.

Augment Risk explained, “As we move into 2024, there are several risks on the horizon that lend themselves to parametric placements; in particular, the upcoming transition from El Nino to LaNina, coupled with warming oceans, may precipitate a particularly active Atlantic storm season.

“Parametric reinsurance emerges as a beacon in such challenging market conditions, providing clients with a genuine alternative to traditional products. Clients seek coverage through a dislocated market (cat bonds, Retro, and ILWs) and we see parametric reinsurance as a genuine alternative and a part of a buyer’s tool kit.”

Taking a global and capital agnostic approach, Augment Risk brings alternative products and diversifying reinsurance capital together, seeing this as much as a solution to help clients through challenging periods, as well as a core purchase.

“In the face of market headwinds, the timeliness, transparency, and flexibility offered by Augment Risk’s parametric solutions position us to deliver success for our clients in an ever-evolving landscape,” the company explained.