Parametric Insurance

Paying a set amount based on the magnitude of an event

What is Parametric Insurance and what does it cover?

Parametric insurance is a type of insurance that pays out a predetermined amount based on the occurrence of a specific event or trigger, rather than the actual financial losses incurred by the insured. This differs from traditional insurance, which typically covers the actual losses and expenses resulting from an insured event. Parametric insurance is designed to provide quick and efficient payouts, especially in situations where it may be challenging to assess and verify the exact losses.

Main coverage areas of Parametric Insurance:

AI Parametrics

The solution is a policy indemnifying a company for any one or all of the following risks:

Weather Parametrics

This type of parametric insurance provides coverage against specific weather events, such as hurricanes, earthquakes, floods, droughts, or excessive rainfall or hail. The payout is based on predetermined weather parameters like wind speed, rainfall levels, or temperature readings.

Cyber Parametrics

Policy automatically pays out if a customer’s critical IT services – such as cloud, e-commerce, compliance/KYC, security or payment systems – are disrupted.

Catastrophe Bonds

This takes into account the increased operational costs and reduction in profits as a result of a cyber event. This is known as non-physical damage business interruption, which is excluded from property insurance.

Aviation Parametrics

Parametric insurance for flight delays or cancellations provides compensation if a flight is delayed or cancelled beyond a specific predefined time or due to specific circumstances, such as severe weather conditions.

Agriculture Parametrics

Parametric insurance for agriculture protects farmers against losses caused by adverse weather conditions, such as drought, excessive rainfall, frost, or temperature extremes. The payout is based on predetermined crop yield or weather data.

Hospitality Parametrics

Consider cover losses to bookings caused by acts of war, terrorism, natural disaster or unforeseen pollution events. The payout is based on the occurrence of a predefined event or on specific criteria related to the severity or location of the attack.

Earthquake Parametrics

Parametric earthquake insurance pays out a predetermined amount if an earthquake of a certain magnitude occurs within a defined geographical area. The payout is not tied to actual damage or loss but relies on the occurrence of the trigger event.

Commodity Parametrics

This type of parametric insurance helps businesses mitigate the risk associated with fluctuations in commodity prices, such as oil, natural gas, electricity, or agricultural products. The payout is triggered when the price of the commodity or an index breaches a predetermined level.

Supply Chain Parametrics

Pre-agreed indemnification provisions for interruption due to the failure of the supply chain due to pre-defined causes.

Renewable Energy Parametrics

Agree pre-defined pay-outs for energy production shortages.

Pandemic Parametrics

Parametric insurance for pandemics provides coverage against the financial impact of widespread disease outbreaks. The payout is triggered by predefined parameters, such as the number of confirmed cases or a government-declared pandemic.

Am I covered by existing insurance arrangements?

Parametric Insurance is one important part of a comprehensive insurance programme.  It is likely existing insurance arrangements will have elements of cover but may not provide the precise certainty when a specific scenario occurs. Contact Elmore to undertake a gap analysis of your existing cover to that of parametric insurance to see how you are covered.

Keeping Your Data Secure

We take cyber security seriously and are one of the few in the insurance industry to certify with Cyber Essentials. Implementation of Cyber Essentials controls can significantly reduce the risk of prevalent but unskilled cyber-attack.

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