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Triple-I Blog | Rising interest in parametric insurance



Parametric insurance seems to have increased interest by 2020.

A new article in Artemis says that the growing awareness and demand for these products seems to be driven by this year's pandemic-related volatility, as insurance companies and insured "increasingly focus on solutions that quickly can deliver cash and enable better business continuity. ”

According to the article, Aon's Innovation and Solutions team has seen“ a dramatic increase ”in the number of customers who want to understand how they can supplement or replace existing risk transfer programs with parametric structures“ to potentially improve cash flow after a loss event. "

Unlike traditional indemnity insurance, parametric structures cover risks without the complications of sending adjusters to assess damage after an event. Instead of paying for damage that has occurred, it is worthwhile if certain agreed conditions are met. – for example a certain wind earthquake or earthquake magnitude in a given area. If coverage is triggered, a payment is made, regardless of damage.

Rate rate and reduced administrative costs can reduce the burden for both insurers and policyholders. Alone, or as part of a package including damages coverage, parametric insurance can provide the liquidity that companies and communities need for resilience after the disaster.

Parametric methods are discussed as part of insuring against future pandemics and are used to protect hard -for securing natural resources such as coral reefs and mangrove forests. SwissRe and Understory offer parametric insurance for hail-prone geographies.

Aon told Artemis about a US-based telecommunications company that replaced its entire traditional real estate compensation program with a $ 300 million parametric hurricane insurance solution. Artemis says such deals are increasingly coming to market, "with reports of a number of large transactions in the hundreds of millions of dollars this year, as parametric triggers are increasingly embedded in large companies' risk transfer programs."

Covid-19 [19659009]
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