Hospitality operators in north Queensland are facing a cyclone threat with business interruption (BI) exposures their traditional property policies were never built to absorb. Forecasted shutdowns ahead of a system, evacuation and site-prep costs, post-event marketing to lure tourists back to a region and soft covers for landscaping and pools sitting under punishing sublimits - all of it adds up to a bill that increasingly lands on the operator's own balance sheet.
For brokers servicing resorts, hotels and tourism operators across the Top End, the question is no longer whether the traditional BI section responds quickly enough. It is whether it responds at all without a Section 1 physical damage trigger. Parametric products, designed around wind-speed indexes that map neatly onto resort infrastructure, are quietly filling that gap.
Sébastien Piguet (pictured), co-founder and chief insurance officer at Descartes Underwriting, who was in Australia recently, argues the conversation brokers should be having with hospitality clients starts with the pain point - not the product.
Piguet's pitch to brokers is that parametric is not a replacement for traditional cover but a way to solve specific problems traditional cover keeps creating. The starting point is rarely a technical brief. More often it is a client who has just been burned.
"It's not because it's complex - it's more because it's new," Piguet said of the broker learning curve.
In practice, that could mean that brokers walking into a hospitality client meeting need to lead with the gap, not the index. A north Queensland resort operator who has just absorbed a sublimit-capped landscaping bill, an evacuation shutdown with no Section 1 trigger to lean on, or a post-cyclone marketing spend funded out of pocket is exactly the client primed for the conversation.
"Usually the discussion starts with a broker when their client has just suffered a claim which didn't go well and they can see the drawbacks of traditional insurance," Piguet said.
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The broker's role is to translate that disappointment into structure. Parametric covers can be designed around the operator's actual operating reality - when do they shut down, what does that cost, how exposed are the soft assets - rather than around the property schedule the traditional tower is built on.
Where parametric earns its place in a hospitality program is in the design flexibility around wind-speed thresholds. A resort with hardened buildings but vulnerable landscaping, pools and access roads has a fundamentally different exposure profile to a coastal hotel that has to evacuate on a Category 2 warning. Both can be covered but at very different price points.
Piguet said the dial is the trigger sensitivity and it is set in conversation with the client.
"Some clients have facilities which are very resilient and they don't need to buy protection for the less intense tropical cyclones, but others need protection as soon as the wind is blowing, so to speak," he said.
That sensitivity dial is the lever brokers can be pulling. A north Queensland operator whose biggest exposure is forecasted shutdown ahead of a Category 2 system will want a low trigger and pay accordingly. A purpose-built cyclone-rated resort might only want cover firing at Category 4 or 5, freeing up premium for a larger limit. Either way, the conversation moves the broker beyond declared asset values and into a structured risk discussion the client's CFO can actually engage with.
That flexibility extends to what the payout funds. Once the index trigger is hit, the cash is largely the client's to deploy - site recovery, marketing, employee support, soft asset replacement.
"As soon as the triggers are met, we want the coverage to be as wide as possible," Piguet said.
For hospitality operators in particular, that breadth matters. Post-event marketing to rebuild visitor confidence in a region, replanting landscaping, refilling and resurfacing pools and the increased cost of getting staff and supplies back on site are precisely the line items that fall outside or beneath traditional sublimits.
The bigger picture, Piguet said, is that parametric is not trying to be everything to everyone - it is trying to be useful where the traditional market is leaving operators short.
"It's a risk for the product if we focus just on the technicalities; we lose the big picture," he said. "When we are successful with clients, it's because we were able to solve pain points."
For brokers in north Queensland writing hospitality, those pain points are already on the desk. The next conversation with a resort client about BI cover is unlikely to be improved by another sublimit but it might be improved by an index.
