Canadian risk managers are showing increased interest in alternative risk transfer such as parametric insurance, says James Gasco, head of Canada for Swiss Re Corporate Solutions.
“We specifically had a lot of conversations about parametric insurance in terms of how it can wrap around and complement their traditional risk programs,” Gasco says in an interview with Canadian Underwriter. “I think [risk managers] see the benefit, the flexibility, for example, that it can cover direct losses, but also indirect losses [and] that it can help bridge that protection gap that we see in traditional risk programs.
“And then also just the fact that it’s a very straightforward claims adjudication process with a quick payout, and it can give liquidity when it’s needed most. The flexibility of where you can apply it is really quite beneficial.”
Gasco spoke with CU in late October following the RIMS Canada Conference in Vancouver. He was discussing some of the key takeaways and reflections coming out of the conference.
Indeed, conference speakers used the example of parametric insurance to cover underground assets such as pipes that would otherwise be completely uninsured.
Youssef Abdul Baki, a structurer at Swiss Re Corporate Solutions, noted that parametrics can be used to infill a deductible, top up limits, business interruption, etc., “as long as it’s tied to that trigger event, [such as] an earthquake, or a hurricane, or a hailstorm.”
Added Colin Harper, managing director of alternative risk transfer at Aon: “This isn’t about providing capacity in a less expensive manner than what you currently obtain in the open, traditional market. Think of this as more of a financial mechanism to pre-finance untransferred economic disaster.”
There’s also interest in structured solutions, or insureds exploring how they can retain more risk or control their cost of risk transfer, Gasco adds.
“So, insureds wanting to be able to take more risk, but in a controlled fashion,” he says. “What was interesting is often these are done in the context of a captive insurance program, but not all of our insureds have those.”
As an example, he points to Swiss Re Corporate Solutions’ virtual captive, a multi-year framework that mimics the mechanism of a captive and brings a lot of the same benefits but doesn’t require establishing a captive.
Understanding the drivers of risk
Many clients are also showing an increased desire to better understand the drivers of their risk from the perspective of an insurer. “‘How do we use some of the data that insurers have to get a better view of [our] risk, take more control of [our] risk, and ultimately build resilience as well?”
When asked about the most pressing challenge the industry faces, Gasco pointed to Canada’s record-breaking NatCat year, expected to cost the industry more than $7.7 billion in insured losses in 2024.
“[There was] widespread recognition that as the world adapts to climate change, so must the insurance industry,” he says. “I think that there was probably an elevated level of concern, almost palpable really, about the impacts of natural catastrophes.
“So naturally, there was a lot of discussion about what this means for the insurance industry in 2025, what it’ll mean for reinsurance renewals come Jan. 1, and I think also more broadly, what it portends for Canadian society, and how the insurance industry is going to play a role to continue to build resiliency.”
Looking to the future, Gasco points to leveraging advances in artificial intelligence (AI) as an emerging opportunity over the short- to medium-term. “Most companies probably have experimented a little bit with some out-of-the-box solutions like [Microsoft] Copilot to gain some efficiencies. But I think this is really the tip of the iceberg.”
Companies like Swiss Re use tools for improved fraud detection and identification of subrogation potential. Gasco sees AI expanding into other areas of the insurance value chain, including workflow efficiency, underwriting, claims servicing and handling, and operating expenses.
“I think in the coming years, we’re going to see AI impact how we transact business and how we underwrite,” Gasco says. “When you look at a five-year time horizon, I would not be surprised if we see a significant change in how we transact business and underwrite risks.”
Feature image by iStock.com/vaeenma
