This article was produced with Aviva Canada.
Gia Snape of Insurance Business sat down with James King, head of fronting, global corporate & specialty at Aviva Canada about their newly launched parametric insurance offering.
Parametric insurance is gaining momentum as a valuable risk transfer tool, offering businesses a way to safeguard themselves against the unpredictable impacts of weather events.
But while the concept has been around for a while, parametric coverage hasn’t always been accessible to the average business.
To help brokers and their clients address a broader spectrum of weather-related risks, Aviva Canada’s global corporate and specialty (GCS) group has launched a new parametric insurance platform.
The flexible offering opens the door to businesses and municipalities that may not have historically considered parametric insurance necessary but are now facing increasing risks due to climate change and volatile weather patterns.
“Traditionally, parametric insurance was used for businesses in high-risk areas, like those in the Caribbean or near fault lines,” said James King (pictured), head of fronting, global corporate & specialty at Aviva Canada.
“What we did differently was focus on adverse events rather than just catastrophic ones. We noticed an increasing number of weather events— fluctuating temperature, higher or lower than normal precipitation —affecting businesses, and we asked ourselves, 'How do we protect our customers?'”
Businesses are often left struggling with the financial consequences of weather events, even when their property isn’t severely physically damaged.
The core of Aviva Canada’s unique parametric offering lies in its ability to provide financial support in the form of extra expense cover for unexpected expenses or operating changes that arise from adverse weather.
Parametric policies provide coverage based on predefined triggers chosen by the customer, offering additional expense coverage beyond traditional claims property insurance triggers.
“Our product uses an index system, meaning that for each millimetre of precipitation or degree of temperature that deviates from the set measurement on the platform, the payout is predetermined,” said King.
“So, for example, every millimetre might be worth $50,000. When you set up the policy in the platform, you know exactly how much you’ll be paid per millimetre when the conditions pass a certain deductible threshold."
The policies are flexible, with durations ranging from two weeks to five months, depending on the needs of the business.
Through Aviva Canada’s solution, claims are simplified through real-time data collection and index-based payouts, making it quicker and easier compared to the traditional claim process.
If the weather event exceeds the deductible and hits the weather limit, without exhausting the full policy limit, the balance limit is rolled over to provide cover for the remaining policy period. This means clients need to carefully select appropriate limits and weather limits to avoid exhausting coverage too quickly.
Aviva Canada uses 20 years of weather history from satellite data on its platform. When brokers enter the platform, they can benchmark the weather patterns over a certain period and customize policies to fit their client’s needs.
“For example, if a certain type of weather event happens every four to five years, brokers can tailor a policy based on past events, setting coverage levels and deductibles accordingly,” King said.
A significant benefit of parametric coverage is that companies can stay resilient by covering those unpredictable extra costs, such as heightened energy bills during extreme heat or cold spells, or the cost of additional resources needed to manage an unusually wet season.
“While traditional policies cover physical damage or business interruption, this parametric coverage fills the gap,” said King.
The platform currently offers five live products—rain day, rain season, frost, cold, and heat—and it's designed to be user-friendly. Brokers have the power to adjust key parameters, such as the deductible or the weather limit, directly, and they can see the pricing impact in real time.
They can also quote and issue policies directly from the system, bypassing the traditional approach where submissions are reviewed by an underwriter.
"It’s a very intuitive system,” said King. “Brokers just enter the client’s address or use a map to select the location they want to cover. From there, they choose the limit, time period, deductible, and weather cap.”
King also revealed that Aviva Canada is working on expanding to wind and solar indices, and have plans to add a west coast earthquake deductible buydown product next. "One of the great things about our platform is that we can continually add new products as the demand grows and as we have the data to support them," he said.
King acknowledged that some clients may be hesitant or unaware of parametric insurance, similar to the early days of cyber insurance. The Canadian market is in the early stages of embracing parametric insurance, but the growing frequency and unpredictability of severe weather events have spurred interest.
This rising awareness is helping businesses realize that they need to be financially resilient to the impacts of climate change.
"Our parametric offering is very different in the Canadian marketplace,” King noted. “No one else is offering anything like this, and it’s leading the way. We see it as a fantastic opportunity, and it shows real initiative in supporting our customers and brokers.”
One of the biggest challenges, according to James, is educating brokers and their clients on how to think creatively about risk management. Insurance is often seen in black-and-white terms—if something is damaged, the insurer pays to fix it.
But parametric insurance requires a shift in mindset, where businesses consider how weather events, even minor ones, can have significant ripple effects on their operations.
"We are here to help and support our broker partners when they talk to clients,” King stressed. “The creativity of the broker in understanding the operations of their customers, and the impact of adverse weather can play needs to be flushed out with their client, it’s absolutely key.”
Ultimately, Aviva Canada’s parametric offering represents a shift towards a more proactive form of insurance. Rather than waiting for a catastrophic event to trigger a payout, businesses can use parametric insurance to mitigate the financial impacts of smaller, more frequent weather events.
"It opens up the opportunity for a broker to have a more meaningful discussion with their clients,” said King.
The content in this article is for information purposes only and is not intended to be relied upon as specific professional or expert advice. Aviva Canada accepts no responsibility for action taken as a result of reliance on any information contained in this article. This article provides an overview of the products and services available through Aviva’s Global Corporate & Specialty solutions. For exact terms, definitions, limitations, and extensions, please refer to the policy wording.
Policies provided by Aviva’s Global Corporate & Specialty division are underwritten by Aviva Insurance Company of Canada or are underwritten by local insurers and reinsured by Aviva Insurance Company of Canada. Risk Management and Claims services are provided by Aviva Canada Inc. and a network of external partners. Aviva and the Aviva logo are trademarks used under license from the licensor.
Learn more about Aviva Canada GCS’ parametric solutions here.
