Dramatic climate changes have increased investment opportunities for insurance companies keen on providing parametric insurance products to the African market.
Climate insurance, though a new concept in some of the emerging markets, could help mitigate impacts of weather changes not only on the agricultural sector but also on marine transport infrastructure and logistics.
Swiss company CelsiusPro’s CEO Mark Ruegg told participants at 5th annual African Insurance and Reinsurance in Nairobi this week that the African insurance market potential is huge despite “current penetration being small.”
He said to expand the weather insurance index in Africa and other emerging markets it will require insurers to offer “expertise in structuring and tailoring products that effectively mitigates the effects of weather, climate change and other natural perils.”
Ruegg said the use of appropriate software in parametric insurance, will enable policy cover providers to “effectively service clients with parametric products ranging from risk modeling, pricing, execution to policy lifestyle management.”
He said the use of big data from satellites, ground measurement devices and additional data providers is critical in designing “smart products and giving climate smart advice.”
However, Ruegg said offering parametric large scale insurance in some markets could face the challenge of sourcing relevant data, designing of appropriate products, effective pricing and dealing with huge number of policies.
Climate change and weather trends could influence the depth of the sea, extent of sea ice and could also trigger floods, which are known occasionally to block shipping channels or amass silt and debris that makes shipping channels shallow, which is expected to have an increasing impact on insurance trends in Africa going forward.