Howden unveils global climate parametrics practice

It will feature over 30 specialists from the firm's lines and divisions

Howden unveils global climate parametrics practice

Insurance News

By Kenneth Araullo

Howden has introduced Howden Climate Parametrics, a global initiative that melds (re)insurance, climate, and data expertise, with the division aiming to provide tailored parametric risk transfer solutions to meet the burgeoning need for climate de-risking across diverse industries, financial markets, and the public sector.

This new practice integrates over 30 specialists from various sectors within Howden and the group's underwriting business, DUAL. The team combines expertise in climate, analytics, advisory, structuring, placement, (re)insurance, underwriting, and capital markets.

The co-chairs of this new endeavour are Philipp Kusche, global head of insurance linked securities (ILS) at Howden Tiger in New York, and Rowan Douglas CBE, the newly appointed CEO of Howden's climate risk and resilience team based in London. Stuart Martin, parametric solutions lead at the Howden climate risk and resilience hub, will oversee the coordination of the practice.

This initiative is expected to leverage Howden's sector-specific knowledge, strategic partnerships, data resources, analytics, and modelling capabilities to drive technical innovations in resilience and decarbonisation. The goal is to create parametric products in collaboration with reinsurance and capital markets, bolstering resilience to multiple hazards for both corporate entities and communities.

Building upon prior successful endeavours, including protection for smallholder farmers in Jamaica and Africa, residents near 10 active volcanoes, and marine protected areas in the Philippines and Belize, as well as agricultural solutions in South America delivered by DUAL, this practice further solidifies Howden's commitment to proactive risk management.

The value of parametric insurance

Parametric insurance, initially established in the reinsurance and energy markets, offers predefined payouts based on specified trigger events. A distinct advantage of this approach lies in the speed and transparency of payouts, crucial for financial institutions seeking to hedge exposure to weather, carbon, or commodity risks, as well as for humanitarian agencies requiring urgent resources after a disaster.

Parametrics, often enabled by satellite data, play a vital role in providing financial protection in emerging and frontier markets, representing a swiftly expanding market share. These solutions are highly relevant for various climate risks, encompassing natural catastrophes and the performance of carbon markets.

The escalating demand for climate-centric solutions is reshaping the potential scope and scale of the parametric market. Regulatory and investor pressure to disclose climate risks, combined with the increasing availability of high-quality data sources, will further propel this momentum.

As per the group, Howden's newly established practice is poised to be a crucial part of the solution, presenting opportunities to harness the full potential of parametrics in de-risking the transition to a resilient net-zero future while safeguarding natural capital.

“The curiosity and excitement surrounding parametrics as part of the climate solution was palpable at New York Climate Week in September. From infrastructure to agriculture, urban resilience to mangroves, through to the carbon markets, everyone wants to learn more, but this wider curiosity is often matched by confusion. It is a new area for many in the climate mainstream with strange jargon and different concepts,” Howden climate risk and resilience CEO Rowan Douglas said.

“Howden has made a pioneering move to combine its climate, parametrics and sector expertise into a unified global practice. As part of our client commitment to de-risk their resilience to climate change and low carbon futures, Howden Climate Parametrics will demystify the concept of parametrics and deliver solutions to protect assets, lives, and livelihoods,” Douglas said.

In other recent developments for the insurance group, Howden also recently announced the launch of Howden Ventures, a new arm that aims to establish an investment and risk incubator that expedites the development of insurance products.

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