Lloyd's launches new parametric profit protection policy for hotel industry
The new solution uses a “parametric” trigger, so a customer is automatically indemnified if any unforeseen event leads to reduced profits.
This is the first policy developed by Lloyd’s Product Launchpad, which was launched in June to accelerate the development of insurance and reinsurance products for today’s new and emerging risks. The Facility is backed by a group of 24 Lloyd’s syndicates who have together committed over £100 million of underwriting capacity.
The new product protects hotels from lost profits, for example, due to unexpected events occurring within their market that are outside the control of the hotel. For example, the terrorist attacks which occurred in Paris three years ago had a catastrophic impact on the city’s hotels, with revenues said to be down by 15% that summer and high-end hotels reporting declines of between 30% and 40% as wealthier tourists stayed away. In the UK, hotels, alongside other businesses, suffered significantly in Salisbury after the Novichok nerve-agent incident early last year which saw many parts of the city cordoned off during the Police investigation and subsequent year-long clean-up, deterring tourists.
As the product defines an insured event as the difference between forecast and actual market trading data widely accepted by the hotel industry, the need for named perils has been abolished exemplifying the creativity and flexibility of the Lloyd’s market.
Once an insured event occurs, a pay-out is triggered protecting hotel profitability and thus can be used to reduce cash flow volatility, negotiate contractual agreements and unlock contingent liability exposures for many parties in the hotel and hospitality sector.
The new hotel product is led by Tokio Marine Kiln and additionally supported by the following Lloyd’s Product Launchpad members: Chaucer, Munich Re Syndicate, Beazley, Faraday and Axis.
Hotel owners and operators know all too well how unexpected events can suddenly impact trading. This new product will provide much-needed peace of mind for them to remove some of the volatility that their industry can experience through issues over which they have absolutely no control.Tom Hoad, Head of Innovation at Tokio Marine Kiln and Chair of the Product Innovation Facility
Lloyd’s has a well-deserved reputation as the home of insurance innovation and I’m delighted to see the speed with which the new Product Innovation Facility, whose capacity has more than doubled in the past few months, is moving. Using the combined expertise, insights and entrepreneurial spirit of all those involved, we’re developing, incubating and launching exciting new products to meet the very real needs of today’s world.Lloyd’s CEO, John Neal
It’s a credit to Tokio Marine Kiln, and the supporting members from the Lloyd’s Product Launchpad, that new products are being developed to address specific risk financing challenges that are outside of traditional insurance products. In today’s competitive world the challenges we face are complicated and unique, and the agility of innovative risk financing solutions are key to support our business objectives.Marc Bentley, from InterContinental Hotels Group
- The Product Innovation Facility is a commitment to nurturing a “safe space” for underwriters to experiment with new ideas in a controlled way, which balances the need for appropriate oversight with the risk of not innovating fast enough. The space will explore non-standard risks that might not fit the traditional market such as risks relating to intangible assets, new technologies and others. For more details including a list of members, see: https://www.lloyds.com/news-and-insights/product-innovation-facility
- In July Lloyd’s launched two reports that look at how smart contracts and parametric insurance can power efficiency and enhance the customer experience. For more details see: https://www.lloyds.com/news-and-insights/risk-reports/triggering-innovation
- More news and information available from lloyds.com