NormanMax in talks to offer parametric endorsements for US commercial property covers

By Henry Gale

June 16 - (The Insurer) - Parametric specialist NormanMax is in discussion with large U.S. carriers about offering parametric catastrophe covers as an endorsement to commercial property insurance policies, its president of embedded solutions Samuel Broomer has said.

Speaking to Parametric Insurer, Broomer said parametric coverage could be provided in property insurance policies similarly to how equipment breakdown coverage is often offered as an endorsement to property insurance policies.

Broomer previously worked at equipment breakdown insurance specialists HSB Group and Mutual Boiler Re (now known as FM Boiler Re) before spending a decade at Berkley Re, where he was most recently executive vice president and chief strategy and innovation officer. He joined NormanMax in February this year.

NormanMax has engaged in discussions with top 25 U.S. carriers about providing parametric covers as an endorsement, with a focus on commercial lines E&S business, Broomer said. He said NormanMax expected to earn revenue through this method of distribution by Q4 this year.

A parametric cover would help cover losses retained in businesses' deductibles, he continued, "but the real opportunity is business interruption and extra expense without physical damage".

Unlike the structures used for large commercial parametric covers, which are typically customised to a property's location and exposure, parametric endorsements would be simpler and binary. For example, a state could be divided into different zones, with policyholders receiving a payout if a catastrophe affected their zone.

Broomer explained that NormanMax used such a zone-based trigger for earthquake risks in California in a pilot programme with a tier-one insurance broker.

The limits for parametric endorsements would also be small, Broomer said, such as $5,000 to $10,000 for homeowners, $25,000 tp $100,000 for high-net-worth individuals and up to $250,000 for commercial lines.

For homeowners, an embedded parametric cover could help households meet mortgage lenders' requirements, Broomer added.

"If you have a homeowner that has a wind deductible at seven (percent), a tier-one lending institution is going to only take a five, then that spread can be handled through the (parametric) insurance product," he said. "We're looking to have that conversation with the lending community."