Meteo Protect is a truly unique company: They offer financial products aimed at protecting companies from the adverse effects from all types of weather conditions. At the core of their business, they work with SAP Hana. We got a chance to talk to Meteo Protect’s COO Michael Koch.
Mr. Koch, Weather Risk Management sounds exciting – how did you come up with the idea and what has happened since?
The idea for Meteo Protect came to being after one of our partners observed the effects of a particularly warm winter on sales of car batteries; in effect the losses were so great, the company closed. It was obvious that climate change is aggravating naturally occurring climate variability and firms are increasingly recognizing that weather is responsible for unexpected sales losses, increased production costs, or lower yields.
Taking advantage of significant advances in data processing, modelling, and forecasting, Meteo Protect established a mean to hedge these risks using index-based weather insurance.
Today, Meteo Protect has become the world’s leading provider of weather insurance, growing in the space of six years from a small start-up providing a completely new form of insurance in a traditionally inflexible and closed market, to having received the accreditation to underwrite Lloyd’s contracts.
At the same time, index-based weather solutions have gone from obscure solutions primarily used by the energy market in the form of weather derivatives, to today the conditions of the weather risk transfer space itself being compared to that seen in the catastrophe market pre-2005, suggesting ample opportunity for innovation and expansion.
What kind of help did SAP Startup Focus provide?
SAP provided us with full and early access to Hana technology, with support from their experts that enabled us to migrate our engines to their extremely powerful analytics and data management platform.
Thanks to Hana technology we have been able to deploy our targeted climate change impact analysis and our customized weather risk pricing applications to serve global clients on a fast and secure environment and build it into a product we now offer to insurance companies.
On the commercial side, from the beginning, the SAP Startup Focus Program helps to connect us to clients- insurance and reinsurance companies, brokers, cooperatives and corporate enterprises- each of whom is also using SAP software and can trust our solutions since they are certified by SAP.
Predicting weather and the connected risks seems like a complex task, how does your solution work?
The core process behind our solutions is an analysis of the impact of climate change on the weather risks that affect each of our clients. This implies understanding the history of weather for thousands of risk scenarios which have specific geolocation, time definitions and weather definitions.
In essence for each of our clients, whether it is a modest farmer in Spain or in Pakistan, or a major food processing industrial actor in Europe or in the US, we model their risk and replay it against the history of weather in order to build the optimal insurance solution, and to come up with the right pricing.
Meteo Protect created a full weather risk management platform including an app that lets customers select their policy specifications, including geo-location, coverage period, and weather parameters, and uses the Hana Cloud Platform to aggregate weather-related data, analyze risks, and price and underwrite the policy – all in real time.
Beyond this app we have also built the processes and tools to manage the contracts and the exposure for insurance companies or Lloyd’s syndicates.
What role does Hana play in that?
Over the last 20 years, the frequency and intensity of weather anomalies and associated damage have both doubled, yet traditional weather-related insurance policies have remained largely unchanged, posing a problem for businesses and for insurers.
Meteo Protect is changing that by creating customized policies so specific that they address the weather risks posed in an individual farmer’s location. To achieve this level of accuracy, Meteo Protect relies on SAP HANA to upload data up to 12 times faster than traditional platforms allow.
As a result, we can price scenarios and policies on demand, which keeps operation costs low while optimizing the customer experience. Meteo Protect uses Hana to aggregate over 100 billion weather-related data points from multiple sources.
Hana provides us the ideal mix of performance, security, and ease of implementation and use.
If you could pick one thing that makes Meteo Protect and your solution special and unique: What would it be?
We have created a fully automated web platform making it easy for any insurance, cooperative or large corporate enterprise to distribute, underwrite and manage index-based weather insurance, with our platform fully customized and branded.
Meteo Protect’s defining advantage is that we have industrialized the data management, risk modeling, pricing and lifecycle management processes of providing parametric hedging products.
This is what actually makes it possible now to deliver resilience to the whole food chain, from farmers to food processors and distributors, and also to the renewable energy market.
What kind of data is used for your solution?
We tend to use the data that best reflects our client’s risk. It is often meteorological data that can be sources from ground stations operators, from satellite imaging or from forecast-type reanalysis.
We also use market data which includes agricultural yield and utilities-related data (renewable energy production/load factor, energy consumption, and power outages) as well as commodity prices.
Of course on top of those and for industrial or energy-related clients we often have client data that includes sales volume, procurement costs, proprietary weather data; and for wind farms, their production history.
What are the customer-side requirements regarding IT-infrastructure and data availability?
The specificity of Vivaldi, our platform, is that it contains very little client data and almost no user data. Most of what we process is collected in the environment and our craft does not require specific knowledge of the client. As a matter of fact we tend to offer a toolbox on which our clients, the insurers, build their product offer.
And then this product offer allows their own clients, the protection seekers, to create their own customized policy.Most of what we process is therefore quite remote form our clients’ infrastructures, and the information exchanges are essentially limited to account management, reporting, transaction pricing, via APIs.
In some cases, as we are licensed to receive underwriting authority delegation, the service is fully outsourced. By the way we even provide back-to-back reinsurance, so our clients can concentrate on the distribution and value creation.
From initial contact to having the customer protected, how long does implementing your solution usually take?
From strategy to implementation, ironically the longest aspect is in the human element- defining the exact target market and product based on a client’s specific weather risks and risk profile as well as establishing the legal framework.
The creation of the product itself usually just takes up to a few days for products or a few weeks for data set creation. The implementation of a client taking on our technology platform to distribute index-based weather insurance is up to 4-6 weeks for API or up to 12 weeks for full web mode.
What are the next steps for Meteo Protect and how does the Startup Focus Program support you in those?
Climate change will continue to affect people in unpredictable and often profound ways, but our clients now have access to a significant measure of protection. Meteo Protect is in a period of profound growth, including recently obtaining coverholder status with Lloyd’s, and by expanding our coverage to a number of new agricultural cooperatives and ten of the fifteen largest energy companies in Europe.
In fact, Meteo Protect will be attending European Utility Week in Amsterdam on 3-5 October as part of the SAP Startup Focus Programme delegation.
During the program, Meteo Protect’s energy sales team will be available at the SAP booth to provide demos of web-based underwriting and pricing platform to produce completely customized insurance for any weather-related risk for the utilities sector.
As the company expands, Meteo Protect is looking to expand our IoT technology to capture more data and to deliver that information to farmers, utilities, distributors, and others who depend on weather for their livelihood.
Meteo Protect’s focus on the changing nature of weather risks and emphasis on the uncertain future is constantly expanding the possibilities for the personalization of insurance products and services throughout the industry and around the globe.
One thing is clear- as our product line evolves, we’ll be increasingly using tools from SAP in the process.