Morocco could benefit from a large sum of money for parametric insurance in the aftermath of the earthquake
The Moroccan government may receive up to $250 million linked to a parametric insurance pool of which it is a beneficiary following the devastating earthquake that hit several areas of the Moroccan kingdom, sources told Insurance Insider, a British insurance website.
Morocco could also receive $1 billion from another risk pooling mechanism that covers seismic risk, but will only be entitled to a partial payout due to its particular conditions, according to the same source.
In this way, a parametric insurance consortium of which the Moroccan government is a beneficiary will receive a total of 250 million dollars after the devastating earthquake that struck the country in the early hours of Friday to Saturday morning and has so far left some 3,000 dead and more than 5,600 injured, as well as extensive material damage.
According to Maghreb Intelligence, this insurance conglomerate will receive the 250 million dollars, which is good news for Morocco, since the Moroccan government is a beneficiary of the consortium and could benefit from this sum of money.
Parametric insurance is insurance that helps limit the financial impact of devastating weather events such as tropical cyclones, earthquakes and extreme rainfall that can affect entire countries. In addition, they offer immediate payouts when a loss occurs and a policy is triggered in that case. The terrible earthquake suffered by the North African country falls into this category as it measured 7.0 on the Richter Scale and seriously affected places such as Al-Haouz, Taroudant, Marrakech, Chichaoua, Ouarzazate and Casablanca.
Also, according to Maghreb Intelligence and Insurance Insider, there is another mutual insurance company that covers seismic risk in Morocco, with coverage of up to USD 1 billion, but only partial reimbursement is expected in this case.
The Moroccan contract terms for parametric insurance were negotiated in this case by Gallagher Re, a US insurance brokerage and financial risk consultancy based in Itasca, Illinois.
Gallagher Re is the reinsurance division of Gallagher. As a reinsurance broker, the global team has the experience and expertise to create tailor-made reinsurance programmes that help people face the future with confidence after a catastrophe of this nature.
The insurance broker confirmed that it was in contact with the Moroccan government and reinsurers to establish the calculation of the losses suffered in the aftermath of the earthquake.
Gallagher Re confirmed that it was too early to confirm the strategy to be followed, but it is most likely that this insurance system will be used. The parametric solution is designed to provide coverage for the uninsured in the event of an earthquake. It is designed to guarantee a quick payout because the trigger is based on the Modified Mercalli Index (MMI).
A panel of more than 20 reinsurers, headed by the world's leading (traditional) reinsurers, is behind the parametric coverage. This type of programme is generally in line with the operators' ESG objectives to provide cover against uninsured risks and to cover the lack of insurance cover in the event of a catastrophe.
Gallagher Re was appointed by the Fonds de Solidarité contre les Événements Catastrophiques (FSEC) in 2020 to develop this scheme, linked to earthquakes above magnitude 5.0 on the MMI scale, as reported by Maghreb Intelligence.
The FSEC was created to compensate uninsured victims of natural or man-made disasters, such as strikes, terrorist acts or riots of any kind. This system provides compensation for those who suffer serious damage as a result of a catastrophic event.
🇲🇦#FLASH| Dans le cadre de l’assurance prescrite par le gouvernement marocain en 2020 en cas de désastre naturel (1er du genre en Afrique), le groupe Gallagher Re va reverser près de 3 milliards de dirhams au Maroc.
— Morocco Intelligence (@MoroccoIntel) September 15, 2023
Nicolas Moinier : « Notre objectif sera évidemment de garantir… pic.twitter.com/YMop6ealiq
Nicolas Moinier, FSEC partner at Gallagher Re, said his group has been working to calculate real-time loss estimates since Friday night's earthquake. They are also in talks with reinsurers to ensure that payments due under the cover can be quickly returned to Moroccans to help them recover and rebuild, as reported by Challenge.
