Insurance Innovation of the month – AXA CYMO

Ninety’s “Insurance Innovations of the Month” feature contains regular snapshots of real and recent insurance innovations, based on conversations with the innovators behind them. They are drawn from anywhere in the world, and from all categories of insurance. If you’ve got an innovation you’d like to highlight, drop us a line at ninetymarketing@ninety.com.

Insurer(s): AXA Climate
Market(s): P&C
Insurance type(s): Commercial

Problem:

Climate change and environmental sustainability are some of the biggest challenges being faced globally. AXA reviewed how it could contribute to a more resilient and lower carbon economy. It saw that the current ‘climate emergency’ warranted further concerted effort as a priority to reach the objectives of the Paris Agreement. AXA’s analysis predicts that there are now five times more extreme events due to climate change; that three out of four companies are frequently impacted by the weather; and that global temperatures will increase by four degrees centigrade by 2060 (according to the intergovernmental panel on climate change).

What AXA has done is to look across its business capabilities as an insurer, investor and community enabler to determine how it uses its asset, insurance and reinsurance divisions to help clients and communities adapt to the climate related risks they are facing. On risk transfer, AXA has deployed its climate expertise and innovative technologies to deliver new climate risk transfer and insurance solutions.

Solution:

The solution AXA has built, CYMO, is a new parametric risk transfer service developed through its AXA Climate unit. AXA intends for this to be the first of a series of solutions to offer climate focused protection to its clients and communities, providing a key role in protecting people and businesses as the world transitions.

CYMO is part of a suite of offerings to support companies in tackling climate risks segmented as:

• Adaptation services to help build resilience
• Alerting services to help protect in real time
• Parametric services to recover faster

CYMO provides the necessary climate-related insurance products for these alongside a series of services. It offers weather alerting and 24/7 real time assessment through deploying satellite imagery and drone footage to support clients facing natural disasters. These events could include flood, earthquake, cyclones and wildfire.

At the heart of the CYMO solution are parametric insurance and risk transfer techniques which are embedded within it. AXA is seeing that its clients’ needs, triggered by the increased prevalence of climate-related natural disasters, are becoming increasingly urgent. Therefore, initiatives such as CYMO which leverage parametric triggers for risk transfer, are expected to become more prevalent.

AXA is building on a key market trend as parametric insurance is on the rise as climate change accelerates. It is estimated that global parametric gross written premium has reached $5 billion with annual growth of between 6-9%. Deploying it specifically to tackle climate change risks alongside a set of services reflects a wider move towards prevention, protection plus rapid restitution as insurers seek to bring more holistic propositions to market.

Outcomes:

CYMO is at an early stage of deployment so it is premature to analyse specific outcome. However, the intention is for AXA to become the partner of choice for its clients as it seeks to ‘go beyond insurance’ in this most critical of areas. AXA incudes CYMO as part of its wider efforts to tackle climate change and promote sustainability, including more targeted investments. Having a dedicated unit in AXA Climate means that there can be a real focus in this area, with CYMO intended to be the first of a number of innovations. It is expected that other insurers will follow and we will see further developments in this space as the needs of communities and corporations globally grow in the wake of the impact climate change bringing.

Social impact:

As a social, for-purpose business ourselves, Ninety is always looking for the social, human or environmental impact of new ideas in insurance. Here, the impact is very clear as CYMO is looking to provide benefits to all three. By starting with how parametrics can support rapid recovery in the event of a climate change event, it is benefiting communities and organisations. By offering services such as weather-tracking and real time assessment, it can support minimising climate impacts on both corporations and communities. Alongside more responsible investing and a focus on further innovations, AXA is taking a position which is noble in playing its part to provide societal benefits wider than its own.

 Tips to other innovators:

• Having a focus on the problem to be solved has helped AXA to really zoom in on appropriate solutions. By being granular on this, it has developed a specific offering in CYMO which can then be built out at a future time. At Ninety we see that keeping the problem clear and the solution simple is the best way to move it forward.
• Aligning to broader business strategy is key. This innovation sits squarely as part of AXA’s global strategy and therefore has had the C-suite endorsement to develop. We typically find this level of sponsorship invaluable to avoid a situation where initiatives are ‘orphaned’ when there is no corporate parent to sponsor them through.
• Aligning the right idea with the right time – the zeitgeist is important when it comes to the market being receptive to innovations. Notwithstanding the significant impact of the Covid-19 pandemic, global climate change and sustainability is a theme communities and corporations are dealing with on a daily basis and the time is now. We advise client insurers to really level-set with their target user groups and the relevance of an innovation in meeting their needs from the very outset.

Categorization for insurance innovation portfolio planning:

Ninety Ten Big Ideas: this is an example of Ninety’s “Intelligent Risks” and “Risk Prevention” Big Ideas.

Ninety Ten Types of Insurance Innovation: this innovation combines the following Ten Types categories – 1) Operations & Claims, 2) Added-Value Services, 3) Customer Experience, and 4) Brand & Marketing.