Lloyd’s has partnered with New Zealand start-up Bounce to launch a parametric earthquake insurance product in the country - one of the world’s most quake-prone locations as it sits on the edge of a zone of intense seismic activity known as the Ring of Fire.

The product, which takes the same name as the start-up, also has the support of Guy Carpenter, Marsh and US-based Jumpstart Insurance.

Developed by Bounce founder and CEO Paul Barton, the product aims to provide customers with affordable earthquake insurance and fast claims payments within five days of a strong quake.

It works by tracking Peak Ground Velocity, a measurement of quake intensity. Payments will be triggered when a reading of 20 centimetres and above is detected, which is the equivalent of a “severe” seismic tremor.

Claims are based on the strength of any earthquake, with payments based on “steps”. This means that the stronger the earthquake, the more is paid out.

The product is not designed to replace conventional earthquake insurance that covers significant loss. Its objective is to provide immediate cash flow to cover a wide range of miscellaneous expenses to kickstart a financial recovery after a massive quake.

Lloyd’s says the new offering reflects its commitment to remove product complexity and provide enhanced coverage plus clarity to customers through simpler risk solutions.

“Lloyd’s has a long and proud history supporting New Zealand by insuring some of its greatest assets and innovations, through to some of the most destructive earthquakes this impressively resilient nation has withstood, particularly over the last decade,” CEO John Neal said today.

“We’re thrilled to be able to step up and provide a technologically sophisticated and innovative earthquake insurance product, Bounce, which will provide customers with much needed support and financial resilience in the immediate aftermath of an earthquake.”

Mr Barton says the offering will give households and businesses confidence that they will have some form of financial support to begin their recovery plans if they are caught up in a severe quake event.

While it is too early to gauge the market’s reception to the product, he told insuranceNEWS.com.au that “anecdotally, product validation discussions have been very positive about the benefits and the demand for a product like this, particularly in known seismic regions of New Zealand”.

The product is available to individuals, households, and small and medium sized businesses, he said.

“We will be predominantly leveraging a direct to consumer distribution model via our website,” he told insuranceNEWS.com.au. “However where it makes sense, we are also exploring broker distribution arrangements, particularly to support small and medium sized businesses interested in this type of cover.”