Arbol lines up $250m non-traditional capacity, targets $1bn+ next year

Arbol, a provider of marketplace technology that supports parametric risk transfer or weather insurance and utilises smart contracts, told us that it has lined up $250 million of capacity from non-traditional market sources to help it expand.

Arbol acquired well-known specialist provider of weather risk transfer and weather hedging solutions eWeatherRisk in April 2020, as part of a mission to revolutionise the way weather risk transfer contracts are bought and sold.

Arbol’s marketplace focuses on parametric or index-based risk transfer protection against weather variation and extremes, aiming to provide fast-paying protection, akin to traditional insurance but without the need for lengthy claims processes.

After around four months, Arbol’s platform had facilitated almost 200 transactions for a wide range of clients from individual farms to corporations, totalling nearly $11 million in notional weather risk. That figure has now surpassed $15 million of risk.

Recently, Arbol worked alongside Global Parametrics and reinsurance firm Hannover Re on a specific transaction.

But lining up dedicated capacity to support a broadening of its weather risk transfer and parametric insurance offering has always been on Arbol’s agenda.

“Having this capacity will give us the ability to continue expanding our selection of customizable, parametric product offerings that pay customers quickly and fairly when bad weather strikes,” explained Sid Jha, Arbol’s founder and CEO. “Our goal is to offer smart weather protection to clients across a range of industries so that businesses can proactively manage climate risk without the drawback of an exorbitant premium or delays and disputes in payouts.”

Jha told us that capital efficiency is key and Arbol wanted to ensure it was able to work with all forms of capital.

“As we always said, the Arbol platform was created to solve problems that hold back the parametric space. As such, we always wanted non-traditional capital to compete with reinsurance capital to expand the parametric market,” Jha explained.

Having announced that it has now secured $250 million of risk capacity, Arbol also said today that it expects this will exceed $1 billion by next year.

Jha told us, “This capital is non-traditional capital. We expect non-traditional capital to expand rapidly into the space as have non-reinsurers entered the CAT market.”

By tapping into a non-traditional insurance or reinsurance capital provider, possibly one of the insurance-linked securities (ILS) names that underwrites weather risk deals, or perhaps even one of the hedge funds that also invest in weather related derivatives, Arbol is looking to extend the efficiencies of its technology platform by utilising the most efficient capacity as well.

The company wouldn’t be drawn on a name for the capacity provider at this time.

Having launched with a focus on agricultural weather risk transfer deals, Arbol now aims to expand into new market areas and will be offering parametric products across energy, leisure, maritime, and other industries.