Clyde & Co has today (15 May) launched a self executing solar energy parametric contract, which by its nature is automatically payable on the occurrence of a triggering event.
The contract covers the insurance of a solar energy producer against the risk of a shortfall in expected energy generation due to unfavourable weather. It automates the performance of the policy by receiving weather data, calculating potential claims obligations, and producing an exportable report of insurance premiums or losses.
Lee Bacon, a partner at Clyde & Co and co-founder of Clyde Code, says: “A connected contract is a digital agreement which links external software systems and data sources to enable the automatic execution of insurance contracts. By using real-world data and streamlining processes it offers significant cost and efficiency gains for the industry.”
The contract, developed by Clyde & Co’s tech-legal hybrid consultancy Clyde Code and been built in collaboration with smart legal contracts platform Clause. It has been built according to the specifications developed by the Accord Project, although it can be deployed on other systems and platforms.
Bacon added: “Connected contracting will bring many benefits to our clients and we are looking forward to expanding the scope of this product to cover different types of insurance and reinsurance agreements to meet client demand. Its launch is an exciting new step for Clyde Code and our work to help clients realise the potential of smart contracts.”
The use of parametric products is on the rise in the insurance sector. Unlike traditional insurance coverage, they don’t require claims adjusting and that can mean significant time savings. Parametric contracts lend themselves to self execution and other examples in use by the market include AXA’s ‘fizzy’ flight delay insurance that it first announced in 2017. When you buy the insurance, it is recorded on the Ethereum blockchain and if a delay of more than two hours is suffered, compensation is automatically triggered.
Experts in the insurance sector see parametric insurance taking on a larger role in insuring catastrophic events.
For more information on how parametric insurance is being used in the insurance industry and legal considerations it raises, download Clyde & Co’s report Parametric Insurance: Closing the protection gap.