Climate change is causing an unprecedented increase in freak weather patterns – and in return , insurers are turning to parametric insurance as a solution
PARAMETRICS
USING PARAMETRIC INSURANCE TO MITIGATE OUR CHANGING PLANET
Climate change is causing an unprecedented increase in freak weather patterns – and in return , insurers are turning to parametric insurance as a solution
WRITTEN BY : ALEX CLERE
Parametric insurance is a type of insurance cover that provides a preagreed payout to customers in the event that predefined parameters are met . In recent years , it has proven particularly popular for insuring businesses and homeowners against the risk of natural catastrophes ( nat cats ); when water levels , wind strengths or seismic activities reach a certain level , the insurer pays out an agreed sum to the insured party .
As it negates the need for loss adjusters , parametric insurance is able to provide much quicker compensation to customers after the fact . The automated nature of parametrics pulls data from public sources , like weather agencies , meaning a quicker and more seamless claims process . So , is it all it stacks up to be ?
Where is parametric insurance most popular ? Understandably , parametric insurance has been heavily weighted so far towards nat cats , for which it is particularly suitable . The data is readily available ; insurers understand the impact that serious nat cat events can have ; and there is a need to deal better with the significant damage caused by hurricanes , wildfires and earthquakes – something that will only get more problematic in the coming years , as climate change continues to affect our planet .
“ We view parametric products as a way to augment the market and provide coverage where other insurers are unable ,” says Mark Hara , US CEO of FloodFlash . “ The protection gap we are hoping to fill is often caused by a combination of difficulties modelling
76 July 2023