Coverage designed around defined events
Key areas of parametric insurance
Unlike traditional indemnity-based insurance, parametric coverage pays when a predetermined threshold or trigger is met, rather than based on proof of loss. Coverage can be structured around specific natural catastrophe risks and used alongside existing insurance or independently. Parametric insurance is index-based, meaning its triggers are tied to measurable parameters such as rainfall totals, wind speeds, earthquake magnitude or the proximity of a wildfire.
Earthquake
Coverage can be structured around a predetermined earthquake threshold, such as defined magnitude. When the specified trigger is reached, the policy pays without requiring proof of the resulting loss.
Hurricane
Parametric coverage can respond when a hurricane meets the predetermined conditions established within the policy, providing access to funds without requiring the insured to demonstrate the extent of physical loss. Triggers may include measurable conditions such as sustained wind speeds.
Flood
Coverage can be structured to respond when predetermined flood-related thresholds are reached, allowing the policyholder to receive a payout based on the defined trigger rather than completing a traditional proof-of-loss process. These thresholds may include measurable conditions such as rainfall totals or water levels.
Storm
Parametric insurance can provide protection for storm-related vents based on predetermined thresholds. Once the defined trigger is met, the policy can respond without requiring proof of the actual financial or physical loss.
Hail
Coverage can address hail events using predetermined policy triggers. When the specified threshold is reached, the policy pays according to its terms without requiring the policyholder to establish the value of a resulting loss.
Wildfire
Parametric coverage can address catastrophic risks such as wildfire using measurable triggers, including a wildfire occurring within a predetermined distance of an insured location.
Standalone or complementary coverage
Parametric insurance can be purchased as standalone protection or used to complement an existing insurance program, providing an additional source of funds when a predetermined event threshold is reached. It can also help address gaps in traditional insurance programs, including high deductibles, exclusions and difficult to place risks or geographic locations.
A faster path from event to payout
The strategic advantages of parametric insurance
Parametric coverage provides a straightforward approach to defined risks, helping businesses access funds quickly following a qualifying event. Unlike traditional indemnity-based insurance, which generally requires a loss assessment to determine the value of a covered claim, parametric insurance pays when the predetermined index or trigger is met.
No proof of loss required
Payment is based on whether the predetermined trigger is met, eliminating the need to prove the value of loss.
Faster access to funds
With no traditional claims adjustment process required, payouts can be made quickly after confirmation that the defined trigger has been reached. This can be particularly valuable when immediate liquidity is critical to recovery.
Efficient payment timelines
The average time from notice to payment is 12 days, with 80% of claims paid within 15 days.
FAQs for parametric insurance
Parametric insurance is index-based coverage that pays when a predetermined event threshold or trigger is reached. Unlike traditional indemnity-based insurance, payment does not depend on providing the amount of an actual loss.
The policy establishes a specific threshold in advance. For example, an earthquake policy could use a defined magnitude as its trigger. Other triggers can include measurable conditions such as rainfall or wind speeds. If an earthquake meets that threshold, the policy pays according to its terms.
Traditional indemnity-based insurance generally determines payment based on the assessed value of a covered loss. Parametric insurance is index-based and pays when a predetermined measurable trigger is met, reducing or eliminating the need for a traditional loss assessment.
No. Parametric insurance does not require proof of loss for a payout. Payment is based on confirmation that the predetermined policy trigger has been met.
Because a traditional claims adjustment process is not required, payment can occur quickly. The average time from notice to payment is 12 days, with 80% of claims paid within 15 days.
Yes. Parametric coverage can complement an existing insurance program or be purchased as standalone coverage, depending on the risk you business needs to address. It can help address gaps such as high deductibles or exclusions within traditional insurance programs.
