There has been a lot of scientific research surrounding the Alpine Fault. Bounce is pleased to provide parametric earthquake solutions to support businesses and households in the region. This case study explores how Bounce helped close the insurance gap for a manufacturing business on the West Coast.

Context

The customer is a large wood processing business based on the West Coast, New Zealand. The facility is in a known seismic region with exposure to the Alpine Fault. A study led by Dr. Jamie Howarth of Te Herenga Waka - Victoria University of Wellington indicates that there is a 75% probability of an Alpine Fault earthquake occurring in the next 50 years, and there is a 4 out of 5 chance that it will be a magnitude 8+ event. For context, a magnitude 8 earthquake on the Alpine fault will release around 350 times more energy than the 6.3 Lyttelton Earthquake in 2011! Check out the AF8 Hazard story map.

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 The Problem:

The business is a wood processing facility located on the West Coast.

The business recognises the significant impact of a rupture of the Alpine Fault and seeks insurance to cover the immediate damage, alongside the impact of a prolonged business disruption due to restricted access in and out of the region.  

The business has good insurance coverage, but with a 10% material damage and business interruption seismic deductible. The imposed 10% deductible presents an exposure lying outside of their risk appetite, and the business was seeking an insurance policy to reduce the potential financial impact of this exposure at claim time. The customer's Insurance Broker reached out to Bounce to help close the gap.

‍The solution

Bounce helped the customer transfer a significant portion of their Nat Cat risk resulting from the 10% deductible on their traditional insurance policies to a parametric earthquake cover. Our solution’s parametric thresholds are based on Peak Ground Velocity (PGV) measure of shaking intensity with eligibility for a 100% payout being triggered when the ground moves by 30cm per second or more. This is broadly equivalent to a magnitude 6.0 earthquake. Bounce relies on nearby GeoNet strong motion sensors to provide near real-time data that we can use to determine claim eligibility after an earthquake event.

The Result

The customer is eligible for a claim payment if their nearest GeoNet sensor meets the threshold triggers during an earthquake event. Our parametric policy significantly reduces the exposure for the customer while at the same time providing them with confidence of a cash payment once the policy has been triggered by an earthquake. In this case the payment can be used to cover initial repairs, technical reports, loss earnings, and to support staff through the disruption. The customer can also use the funds to bridge production disruptions which they may face due to long-term infrastructure damage.

In this case, the Bounce parametric solution is good for the customer and good for community resilience as well.

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