Kairos and CHAZ Brokers create parametric typhoon insurance for an offshore aquaculture company

Kairos Risk Solutions, a regional risk consultancy based in Singapore, has collaborated with CHAZ Insurance Brokers, an insurance broker based in Thailand, to develop a tailored parametric insurance solution. This solution is specifically designed to protect an offshore aquaculture company from the effects of typhoons in the South China Sea region.

This marks the first successful parametric insurance deal to be finalized through the partnership between Kairos and CHAZ Brokers. The client in question is a well-established, regional offshore aquaculture company that has faced ongoing challenges due to the negative impact of typhoons, including significant reductions in yield.

To address this, CHAZ Brokers structured an annual "cat-in-a-box" typhoon cover, which provides a payout based on the severity of typhoons, ranging from Category 2 to Category 5. The cat-in-a-box model is designed to automatically trigger payouts when a catastrophe, like a typhoon, occurs in a predefined area and meets the minimum intensity threshold set in the policy. The insurance solution covers two distinct locations within the South China Sea region, ensuring that the client’s operations are protected from potential typhoon-related losses in these areas.

Jeffrey Khoo, the Chief Executive Officer of Kairos, commented on the growing interest in parametric insurance across Southeast Asia. He emphasized the challenge of designing parametric solutions that not only make financial sense but also effectively address the risk exposures of clients. “Interest in parametric insurance is growing steadily in Southeast Asia,” Khoo said. “The challenge would be to develop parametric solutions that are economically sensible while adequately addressing the risk exposure of clients.”

The "cat-in-a-box" remains one of the most widely adopted parametric insurance structures. It is designed to provide rapid payouts when a disaster, such as a typhoon, occurs within a designated area, provided the event meets the pre-agreed intensity criteria. This approach allows businesses to receive quick financial support to help mitigate the damages and losses caused by extreme weather events like typhoons, ensuring they can recover more swiftly and maintain operations.