MGA Yokahu: building resilience to Caribbean hurricanes

When hurricanes crash across the Caribbean, the most vulnerable people are often also those least likely to have insurance.

So when Tim McCosh, founder and chief executive officer of parametric managing general agent (MGA) Yokahu, saw the ongoing devastation left by hurricanes, particularly in vulnerable communities, he felt “there had to be a better way”. He saw that parametric insurance could help make cover more accessible to vulnerable communities as well as setting them up to better cope with climate change in the future.

McCosh, who spent 10 years as a re/insurance broker in the London Market, travelled to the Caribbean in January 2018. He saw first-hand the remaining impacts of hurricanes Irma and Maria in the US Virgin Islands and Puerto Rico.

“At the point I visited, the news about the hurricanes had disappeared from the mass media. Even in the London Market, people were aware of claims going on, but it wasn’t necessarily being talked about. I was there and could see the reality of how little had been achieved in the three months since the storms. It led me to believe there had to be a better way,” he recalled.

This led McCosh to create Yokahu. The startup is a parametric insurance MGA or “digital engineer” that specialises in climate risk and it has started with the problem of hurricanes in the Caribbean, he explained.

The name Yokahu comes from the mythology of the Taino, the indigenous people of the Caribbean, where Yokahu is a god-like protector. “Yokahu sat on a mountain in Puerto Rico and protected the people from hurricanes,” McCosh added. A very apt name, then.

In keeping with the spirit of this regional mythology, McCosh is adamant that parametric insurance can help protect and build resilience to climate change by making risk protection more accessible.

“We know that the extreme weather events that form part of climate change are happening more frequently. And those people most at risk have largely been neglected by more traditional insurance policies.

“For example, to insure your house against damage it has to be built to a certain standard, otherwise it’s not deemed insurable. Therefore, vast populations of the world cannot even access insurance, let alone afford it,” he said. Parametric insurance bases cover on an event, so it’s not necessarily about definitely replacing a home, it’s a broader coverage of that.

“In a microinsurance sense it’s an amount of seed capital to restart your life. And because it’s more simplistic—there’s an agreed payment for a certain level event—you can break that down into microinsurance and therefore enable access for vulnerable communities.”

For vulnerable people parametric insurance can be linked to an event and to an outcome for that individual, enabling new ways to protect them.

Systemic resilience needed

“What we’re looking at in terms of the Caribbean is how to create the systemic resilience that that region needs. Talking in broad terms, home insurance penetration is very low,” McCosh said.

“The governments have their risk transfer mechanism for getting infrastructure running, but broadly, the economies are driven by tourism and as tourists, we don’t go on holiday to an area that’s just had a large hurricane come through.”

Inevitably, after a catastrophe businesses need to close, refurbish and wait for the area around them to regenerate, which means they make staff cuts. The employees, who are likely to be in that segment of the population who aren’t insured, lose their jobs at the point when they need money coming in.

“One of the ways we’ve thought about that is: we can’t force a business to maintain jobs, it’s fundamentally not what they’re going to do. But we are launching an employee benefit for the region that enables businesses to buy affordable hurricane protection for their staff that starts paying at about the point where the hotel is likely to make cutbacks in terms of their staffing.

“That provides direct payment to their employee, so they can get by if their hours are cut, or if there’s a longer layoff—the worse the storm the more money they get.

“On the flipside, for the hotel, if they’re laying off their staff say, once a decade, they’ve invested time and money in recruiting, training, and competing for those staff, who live locally. So there is a vested interest for businesses who are forward-thinking,” McCosh said.

“Perhaps you can’t protect the jobs, but you can protect some of the income and create greater loyalty among your local employees.”

As any insurance payout arrives instantly, the area can start regenerating on day one rather than waiting for aid to arrive.

“With insurance money, in a traditional sense, regeneration can take a few months. With this solution, the idea is that the whole local economy starts regenerating more quickly. Tourists will return sooner and that brings business benefits,” he said.

“So for us, when we’re thinking about the ways we create resilience for these communities, it’s about finding the common interest that enables us to deliver this to people. And it’s applicable to almost any setting.”