Parametric Insurance: Claims Paid Without Loss Adjustment

Parametric insurance products are developing rapidly around the world. They’ve been described by global law firm Clyde & Co as “an elegant solution for risk-transfer concerns” and are lauded as attractive alternatives and enhancements to some traditional insurance policies. But what exactly is parametric insurance? Let’s start at the beginning. The Oxford Dictionary defines the adjective parametric as “relating to or expressed in terms of a parameter or parameters”. When applied to insurance, that means coverage is triggered by a parameter — i.e. a metric or an index - that is easy to determine.