Weather Parametric Insurance
What is Parametric Insurance?
Parametric insurance fills the gaps often left by traditional insurance. This coverage provides an alternative to help fund the delay costs and economic losses of a project due to extreme weather events such as rain, wind, snow accumulation, heat or cold.
Parametric solutions are a smart choice for contractors, owners and developers who manage projects exposed to weather events, such road construction and solar installations. They can also be excellent tools for managing risks associated with time-sensitive opening dates for projects such as stadiums or student housing, as well delays in the completion of a hospital or convention center that could have long-term ripple effects for a community.
Instead of indemnifying for an actual physical loss or damage, parametric insurance addresses the probability of an event happening. Parametric insurance sets predetermined parameters and payments — agreed upon by the insurer and the customer — for risks that can be objectively measured and verified by a third-party authority. Once that measurement is triggered, the claim is paid. That’s it. Parametric insurance requires only that the threshold for the agreed-upon risk is met, and this objective approach also means claims can be paid expediently.
Why Zurich Construction Weather Parametric Insurance?
Our Construction team recognizes the challenges of weather delays and the impact of climate change. For more than 25 years, the Zurich Construction team has supported the needs of contractors, developers and owners as they address the many challenges of completing a project on time and within budget. Using the knowledge that comes from years of experience, the Zurich Construction team has developed Zurich Construction Weather Parametric Insurance to help provide a solution for the financial impact of project delays.
This parametric solution complements Zurich’s Builders Risk policy, which requires actual physical loss or damage in order to trigger coverage. While traditional insurance products such as Builders Risk offer protection for financial losses related to property damage due to weather, our Construction Weather Parametric insurance doesn’t require physical damage to trigger a claim. Instead, it kicks in when a predetermined trigger is met by the predetermined threshold of rain, wind, snow accumulation, heat or cold — any of which could temporarily derail a project and inflict financial losses.
What are the coverage features?
- Covers economic losses caused by predetermined weather and climate triggers
- Helps protect against a single peril or a combination of perils including rain, wind, snow accumulation, heat and cold
- Payout is based on the preestablished Average Daily Loss Value (ADLV) and coverage trigger
- Offered on a project-by-project basis
- Claim payments received in weeks
What costs are covered?
Each policy is customized to address your firm’s financial objectives and risk appetite. It covers the costs incurred as a result of project delays caused by extreme weather including:
- Labor costs
- Equipment rental expenses
- Liquidated damages
- Expediting expenses
- Loss of revenue
Parametric insurance in action
Situation:
A first-time Florida stadium builder faced the potential for severe wind during the construction project. A key component of this project is the coordination of four large crawler cranes the contractor is renting. These cranes are very expensive and can only operate if wind speeds stay below a certain threshold. The contractor has very thin margins on this job and is fearful the Florida storm season could result in several days where cranes can’t be operated.
Solution:
The storm season generally runs from June through November in this location, so the Parametric Insurance policy was written for that specific period. It covered 12 days when the maximum hourly average wind speed was at, or in excess of, 40 miles-per-hour during work hours. Protecting its crane rental costs was a smart way for this contractor to kick off the stadium project.
