Timeline: charting the history of parametric insurance
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.
