The Future of Insurance Podcast – Jean-Christophe Garaix & Andy Thompson

Liberty Mutual Reinsurance & Safehub

Season 5, Episode 12, December 5, 2023

Guest Bio

Jean-Christophe Garaix, Head of Agriculture & Parametric Insurance for Liberty Mutual Reinsurance, and Andy Thompson, Co-Founder & CEO of Safehub, join the show to discuss their collaboration on addressing earthquake exposure.

Using Safehub’s IoT sensors, they’ve been able to design a parametric insurance product that’s live in Mexico City – one of the most quake-prone areas in the world – that brings building-specific shake accuracy to the adjusting of claims. This allows for an affordable coverage that can be provided quickly while solving for the basis risk inherent in previous earthquake data like shake maps.

Together, they’re working to create great resiliency through the network effect of improved and more point-specific data coming together to paint accurate pictures of risk and how it plays out.

Highlights from the Show

  • Jean-Christophe (JC) Garaix oversees the parametric business for Liberty Mutual Reinsurance, looking for external / third party index for the basis to adjust a risk
  • Andy Thompson, co-founder of Safehub, is a structural earthquake engineer by background who became acutely aware of the lack of individual-building performance during earthquakes and other shaking events, and sought to create a sensor-based solution that’s easy to deploy to solve this
  • Existing tools are about regional effects, which are helpful for municipalities or disaster response efforts, but not useful for a specific building, where the impact of one building could be completely different to that of a neighboring building
    • This creates a basis risk, which is what Liberty Mutual has sought to solve for, where you cannot apply a broad or regional-data-based application of data for individual coverage on a specific building
    • Liberty Mutual saw demand for such a coverage, but was looking for a way to solve for it without the basis risk
    • They saw a very strong demand in Mexico, given the seismic activity there, and thought if they could solve the need in Mexico, they could solve it anywhere
  • Safehub has been working with many building owners for years to help with business continuity, maintenance and general management of their properties, but thought this could increase resilience by solving the basis risk issue JC talked about by partnering with an insurer
  • The size, simplicity and stand-alone nature of Safehub’s solution allowed Liberty Mutual to extend a coverage like this to smaller insureds in addition to their large property clients
  • For parametric coverage to succeed, JC jokes that you need education, education and education
    • That is why they partnered with a local MGA to help with local market access and education to supplement Safehub’s solution and Liberty Mutual Re’s capacity
  • Liberty is looking at similar solutions for other types of events, like cyclones where there is broad-brush data, but they need to measure the wind speed at a specific location to offer coverage for an individual property
  • Today, the issue is less about data availability (which was the issue a decade ago), and more one of product design
  • A barrier to adoption of the kinds of sensors that allow for solutions like this has been the complexity of installation, making the commercial market more attractive for such products
    • Safehub tried to solve for that complexity in two ways
      • The sensors are easier and more affordable than previous solutions, and they’re standalone, relying on their own cellular connectivity
      • They use the network of their sensors to get more localized shake data, even for properties that don’t have a sensor themselves, but are around properties that do
        • This won’t get asset-specific data, but is vastly better than existing data that has the basis risk discussed earlier
    • They have hundreds of sensors in the Los Angeles basin, for example, and are approaching similar levels in Mexico City, which lets Safehub have more and better data than governmental agencies have at this point
    • Also, as more sensors are deployed and gather data, the entire network gets better as it has more data going into its analysis model, so it can do a better job even with the network that’s already built
  • Bringing asset-specific data in a bigger network allows for more resiliency and protection by enabling parametric and other innovative products that can close protection gaps, offer cover options

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This episode is brought to you by The Future of Insurance book series, part of the Future of Insurance thought leadership series (future-of-insurance.com) from Bryan Falchuk.

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