Peru payout by LM Re & Safehub jolts Shake Network from proof of concept to live parametric claims test

As published in The Parametric Insurer Newsletter (October Digest)

Liberty Mutual Reinsurance and Safehub’s first real-world earthquake payout triggered by the Shake Network has provided a proof point for sensor-based parametric coverage, with the Peru claim showing how granular shaking data can sharpen payouts, reduce uncertainty and support faster recovery from disasters, the companies said.

The claim, tied to a May earthquake in Ica, Peru, was released about 21 days after the event and has become a live test case for ShakeNet Parametric, LM Re’s earthquake solution triggered by Safehub’s proprietary sensor network.

“You never know,” said LM Re’s Jean-Christophe Garaix, emphasising that earthquake covers must be ready from their inception because “an event can happen two minutes after” a policy begins. The Peru event came early in the product’s rollout, he said, “but we (were) ready”.

For Garaix, head of the reinsurer’s parametrics and agriculture division, the significance was not only that the policy paid but where and why it paid. The Peru event was not a headline-grabbing magnitude 7-plus catastrophe, but it was close enough to the insured’s assets to matter.

“That case showed the value to have a granular approach, even for medium events,” said Garaix.

Safehub CEO Andy Thompson said recent earthquakes across Latin America had underscored a broader challenge for parametric earthquake cover: a lack of real-world, localised ground-shaking data in many exposed regions.

“The cornerstone of resilience is data,” Thompson said. “In certain parts of Latin America, we really have a data desert in terms of actual ground shaking.”

Traditional earthquake models rely heavily on equations estimating how seismic waves travel through soil and rock. However, Safehub’s sensor network adds “ground truth data” that can help constrain those estimates and improve decisions for both emergency response and financial recovery, Thompson said.

That has direct implications for one of the central criticisms of the parametric market: basis risk. Thompson believes localised sensor readings can materially improve how closely a payout aligns with actual physical damage.

“The benefit and the reduction in basis risk for having sensor ground truth data to constrain the physical equations could be significant,” Thompson said. “It takes earthquake parametric insurance into a realm where we are more closely aligning the losses with the payout.”

“The recent earthquakes yet again highlight two problems that we see time and time again throughout the world. One is the insurance gap and two is the need for fast granular data for emergency response” Safehub CEO Andy Thompson.

Garaix said the claims process could move rapidly once an event occurs. Sensor information is available within minutes, with the final ShakeNet calculation typically available after roughly 72 hours. In some cases, depending on local requirements and proof-of-loss documentation, he said payment could be completed in under a week.

The next opportunity, both executives agreed, spans corporate, public-sector and financial institutions. Thompson said building-level sensors could work well for corporations, universities and campuses, while regional programs require strategically placed sensors to improve broader shaking maps. Garaix pointed to governments and Latin American financial institutions with concentrated mortgage, finance and banking exposures as key targets.

The Peru payout has already changed the conversation with buyers and capacity providers, Garaix said, giving LM Re and Safehub a tangible business case to show how granular earthquake data can protect their clients’ balance sheets.

For Thompson, the takeaway is larger than one claim though.

“The recent earthquakes yet again highlight two problems that we see time and time again throughout the world,” he said. “One is the insurance gap and two is the need for fast granular data for emergency response.”

That data, he said, can support financial resilience and help authorities respond faster when disaster strikes.

“At the end of the day, it’s about saving lives,” Thompson said. “And that’s what we’re trying to do.”