Protect contractors from heat stroke with parametric solutions | Insurance business America
Volatility and complexity offer “significant opportunity”
Civil engineering
By Kenneth Araullo
As North America grapples with the increasing challenges of climate change, the construction industry is literally at the forefront of sectors feeling the heat.
Extreme heat waves, now more frequent and severe, pose significant risks to human health, operational productivity and financial stability.
In an interview with Insurance Business, Cole Mayer (pictured above), Global Head Parametric at Aon, highlights how parametric insurance can be a strategic solution to protect the construction industry from these escalating risks, providing a mix of agility, efficiency and flexibility , which is not achieved by conventional insurance models.
“With increasing volatility and complexity, there is significant opportunity for construction and real estate companies to leverage parametric solutions to become more resilient to climate and disaster risks,” said Mayer.
How climate risks are growing
The stark reality of increased climate risks is underscored by recent phenomena, including the record-breaking 31 consecutive days of temperatures above 110 degrees Fahrenheit in June and July 2023 in Phoenix, Arizona, as well as the ongoing drought in the Southwest, which resulted in significant economic and insured losses.
Mayer noted that the construction and agriculture industries in particular face increased vulnerability to heat exposure, with OSHA reporting significant numbers of outdoor deaths and heat-related illnesses in these sectors. This situation is exacerbated by workers’ lack of heat acclimatization, which is a critical component in protecting against heat-related health complications.
In response, OSHA has increased its inspections of the most vulnerable industries, emphasizing the urgent need for comprehensive risk management strategies. Here, parametric insurance represents a novel approach to addressing these challenges.
Unlike traditional insurance, which typically requires a post-event damage assessment, Mayer says parametric insurance works with a predetermined “if-then” trigger mechanism and offers quick, transparent payouts based on specific parameters such as temperature thresholds or humidity levels. This model not only simplifies underwriting, but also provides rapid financial relief and allows companies to recover and maintain continuity after extreme heat events.
How parametric insurance closes the protection gap
Parametric insurance fills the protection gap in regions vulnerable to climate disasters, including areas affected by extreme heat. Mayer said that by providing comprehensive coverage against economic risks previously considered uninsurable, this risk transfer solution frees up critical capital for construction stakeholders, from contractors to building owners, mitigates loss of income due to operational delays, and ensures worker well-being.
For the construction industry, the introduction of parametric insurance results in reduced contingent liabilities, assured project schedules and assured financial liquidity, thereby maintaining project viability even under adverse conditions.
Building owners, in turn, benefit from minimized income loss and secured debt service obligations, allowing business operations to run without financial hindrances.
The call to action for construction companies is clear: leveraging forward-looking data and analytics, prioritizing workforce health and well-being, and exploring alternative risk solutions such as parametric insurance are imperative steps.
By implementing these strategies, the construction industry can address the complexities of extreme heat and ensure not only the safety and productivity of its workforce, but also the financial resilience of its operations, Mayer suggested.
What do you think about this story? Please share your comments below.
similar posts
Stay up to date with the latest news and events
Join our mailing list, it’s free!
Source link
2024-04-05 14:22:54
www.insurancebusinessmag.com
