Parametric Insurance: Addressing the Gaps in Traditional Coverage

Summary

This practice note addresses the topic of parametric insurance, a type of insurance that does not indemnify the pure loss, but ex ante agrees to make a payment upon the occurrence of a triggering event. It describes parametric insurance, outlines its origins and the operation of claims payment and trigger events, provides details about the coverage both in the United States and around the world, and explains the benefits and challenges of parametric insurance.