Product Development: Design of a flood cover insurance for SMEs in industrial zones

In collaboration with an innovative weather index insurance start-up, Oko, Allianz developed an index-based flood cover insurance for the city of Ait Melloul based on the ground weather station at the airport and a digital elevation model. This is similar to a model that has already been applied to a crop insurance scheme in Mali that was developed jointly with the Allianz Re Agri team. It is a statistical model that predicts the presence or absence of water for a grid point. This insurance product was specifically targeting industrial zones of the city of Ait Melloul, but was also relevant for three other zones in the country (Agadir, Mohammedia, and Tangier). This meso-level insurance approach was supposed to decrease overhead costs and diversify the risks across the industrial zones. However, due to the lack of loss history and poor index correlation, ultimately, the rates were relatively higher than an indemnity-based solution would have provided.