The Evolution Of Parametric Insurance

Unlike traditional property coverage, parametric insurance is a type of insurance that does not indemnify the pure loss, but rather issues a set payment upon the occurrence of an objective triggering event, such as an earthquake of a certain magnitude or a hurricane of a specific intensity. Sometimes referred to as index-based insurance, this type of coverage has been around for more than 20 years, but it may now be reaching a new level of popularity as organizations look for additional alternative risk transfer options. One of the key virtues of such coverage is that it enables companies to deliver insurance more efficiently. With parametric insurance, you avoid lengthy claims investigations—basically, an index is triggered, a payout is made, no questions are asked, there are no disputes.