Can parametric insurance change the game in climate disasters?
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What are the downsides?
While people with parametric insurance can receive faster payouts, they can miss out on compensation if losses occur when the predetermined criteria are not reached.
A homeowner who took out hurricane parametric insurance triggered at a certain wind speed, for instance, might get no payout if they were hit instead by a less windy storm, but one that dumped a lot of rain as it moved slowly by, said Jonathan Charak, vice-president of insurance firm Zurich North America.
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How widely is parametric insurance used?
Parametric insurance has been used around the world for years, from , to property in the
Since 2007, the Caribbean Catastrophe Risk Insurance Facility, now known as CCRIF SPC, has paid out to help countries recover from disasters caused by earthquakes, tropical storms and heavy rainfall.
Many countries, including the United States and some in Asia, have started experimenting with parametric insurance.
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