On the use of ensemble predictions for parametric typhoon insurance

Kelvin Ng, Gregor Leckebusch, Qian Ye, Wenwen Ying, Haoran Zhao

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Parametric typhoon insurances are an increasingly used financial tool to mitigate the enormous impact of tropical cyclones, as they can quickly distribute much-needed resources, e.g., for post-disaster recovery. In order to optimise the reliability and efficiency of parametric insurance, it is essential to have well-defined trigger points for any post-disaster payout. This requires a robust localised hazard assessment for a given region. However, due to the rarity of severe, landfalling tropical cyclones, it is difficult to obtain a robust hazard assessment based on historical observations. A recent approach makes use of unrealised, high impact tropical cyclones from state-of-the-art ensemble prediction systems to build a physically consistent event set, which would be equivalent to about 10,000 years of observations. In this study, we demonstrate that (1) alternative trigger points of parametric typhoon insurance can be constructed from a local perspective and the added value of such trigger points can be analysed by comparing with an experimental set-up informed by current practice; (2) the estimation of the occurrence of tropical cyclone-related losses on the provincial level can be improved. We further discuss the potential future development of a general tropical cyclone compound parametric insurance.
Original languageEnglish
Article number174
Number of pages25
Issue number12
Publication statusPublished - 1 Dec 2021

Bibliographical note

Funding Information:
Funding: This research is funded by the Building Resilience to Natural Disasters using Financial Instruments grant INPAIS (Integrated Threshold Development for Parametric Insurance Solutions for Guangdong Province China; grant ref: NE/R014264/1) through the Natural Environment Research Council (NERC).

Publisher Copyright:
© 2021 by the authors. Licensee MDPI, Basel, Switzerland.


  • Disaster risk reduction
  • Extreme events
  • Parametric insurance
  • Tropical cyclone
  • Typhoons

ASJC Scopus subject areas

  • Atmospheric Science


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