Timeline: charting the history of parametric insurance

Share
Unlike indemnity insurance, parametric insurance pays out automatically according to pre-defined parameters. Where's this new form of insurance come from?

1990s - Infancy

Parametric insurance can trace its roots back more than 20 years to the late-1990s, when the concept was still in its infancy. Back then, developing nations in Asia were experimenting with index-based insurance, designed mostly to protect farmers and agricultural communities in the event of severe weather.

2007 - Pioneership

The Caribbean Catastrophe Risk Insurance Facility (CCRIF) launched the first multi-country risk pool, successfully adopting parametric policies to help Caribbean nations limit the financial impact of natural catastrophes. Since inception, it has paid almost US$250mn to Caribbean and Central American governments following tropical cyclones, earthquakes and excess rainfall.

2015 - Emergence

Increasing availability of data and rapid digitisation allowed insurers to launch the first mass-market parametric products. Early models were rolled out in the travel sector. China saw the first known flight delay insurance, where travellers would receive up to 300 yuan (US$40) when their flight was recorded as delayed.

2017 - Innovation

Swiss Re launched parametric solution Insur8, which the reinsurer called “the first-ever typhoon warning insurance product for businesses operating in Hong Kong”. It went on to win an insurance innovation award. Earlier the same year, AXA launched a Global Parametrics division to insure clients against emerging climate risks.

2018-19 - Mainstreaming

Big insurance companies began to get on board with parametrics. Marsh launched PathogenRX, protecting businesses against outbreaks of infectious disease; and Aon unveiled non-damage business interruption insurance for companies with many intangible assets. In 2019, Swiss Re announced FLOW, parametric business insurance that utilised existing river water level gauges.

2022 - Future

Parametric insurance has been accepted as a way of providing instant relief in the event of natural events or interruptions. One example is Parametrix downtime insurance, which gives businesses a quick payment in the following an outage, which reportedly occurs to 90% of large organisations every year.

Share

Featured Articles

Trinity’s partnership with LifeSearch extends private healthcare options to the armed forces community with specialised insurance advice

Insurance software provider Sapiens strengthens underwriting capabilities in commercial and London markets with £43m (US$57.6m) deal

Cytora integrates extensive US property dataset to strengthen underwriting accuracy and support more precise risk assessment