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Build Your First Term Sheet

This guide will help you create your first term sheet for a parametric insurance product using the Coverage Designer tool.

What is a Term Sheet?

A term sheet is a structured digital framework used to define, manage, and organize the terms and conditions associated with multiple risk coverage configurations. Each term sheet serves as a container for one or more coverages, each of which is linked to a specific risk management strategy, insurance condition, or parametric trigger.

Step-by-Step Guide

Step 1: Access the Coverage Designer

  1. Log in to your Riskwolf platform account
  2. Navigate to DESIGN > Term-Sheets
  3. Click "Create New Term Sheet" button

Step 2: Define Term Sheet Basics

  1. Enter a descriptive name for your term sheet (e.g., "Rainfall Protection Austria 2026")
  2. Add any relevant notes or descriptions
  3. Click "Create" to establish the term sheet

Step 3: Configure Coverage Details

  1. Click "Add New Coverage" within your term sheet
  2. Enter coverage identification information:
  3. Coverage name (e.g., "Excess Rainfall 2026")
  4. Expected Loss Ratio (ELR): the percentage of premiums expected to pay out as claims
  5. Minimum Risk Rate: the lowest rate at which the risk will be covered
  6. Save your coverage details

Step 4: Set Up Index Details

  1. Configure the index parameters:
  2. Input Variable: Select the measurable parameter (e.g., rainfall, temperature)
  3. Data Provider: Choose the organization supplying the data (e.g., IMD, ECMWF)
  4. Dataset: Select the specific data collection to use
  5. Output Variable: Define the index value that will trigger payouts
  6. Index Period: Set the timeframe for monitoring the index
  7. Save your index configuration

Step 5: Define Triggers and Payouts

  1. Set up trigger values:
  2. Strike: The threshold at which payouts begin
  3. Exit: The point at which maximum payout is reached
  4. Tick Size: The incremental payout amount per unit
  5. Limit: The maximum payout percentage
  6. Sum Insured: The maximum possible payout amount
  7. Review and save your trigger configuration

Step 6: Analyze and Test

  1. Navigate to the Analytics Summary for your coverage
  2. Review historical performance using past data
  3. Examine potential payouts and risk metrics
  4. Make adjustments to optimize your product

Step 7: Finalize and Export

  1. When satisfied with your design, click "Finalize"
  2. Export your term sheet documentation if needed
  3. Your term sheet is now ready to be implemented

Best Practices

  • Start with simple structures before building more complex products
  • Test your design against historical data to understand its performance
  • Ensure that trigger parameters align with the risk being covered
  • Regularly review and update your term sheets as conditions change

Next Steps

After creating your first term sheet, you can:

  • Create additional coverages within the same term sheet
  • Develop more complex trigger structures
  • Connect your product to the Riskwolf distribution system
  • Monitor active policies based on your term sheet design