Parametric insurance is often bought as a complement to indemnity insurance, but newly announced hybrid products combining parametric and indemnity insurance in the same policy will launch in 2022.

These hybrid products, which represent a big shift in how parametric insurance is being sold, will be judged on uptake and effectiveness in paying out.

Their performance will reveal how these approaches compare and determine whether hybrid parametric-indemnity insurance becomes a trend.

While indemnity insurance policies are designed to compensate policyholders for loss, parametric insurance pays out claims based on event triggers. Common triggers involve weather or natural perils, such as hurricanes measured by wind speed or floods by high water mark.

Parametric insurance is well-suited to perils for which indemnity coverage is insufficient, not available or too expensive, but parametric policies are not comprehensive.