Interest in parametrics grows as traditional capacity retrenches

New Dawn Risk moots the more widespread use of parametric insurance solutions for agriculture and natural catastrophe risks in a new whitepaper.

The paper points out that macro trends such as climate change have made certain risks more unpredictable, rendering them difficult to model and tricky to determine accurate return periods.

As a result, there has been a retraction in capacity and coverage for agriculture and catastrophe risks, creating a growing need for innovative solutions.

Max Carter, CEO of New Dawn Risk, said: “Ultimately, parametric insurance can provide an affordable solution for large-scale insurance of catastrophic risks in exposed areas, and we expect this to become more widely adopted over the next several years.”

Attractive to buyers and investors

Parametric insurance has emerged as an effective risk-mitigating solution that offers certainty and protection for existing gaps in traditional cover. It is structured around parameters, such as wind speed, rainfall or water depth, triggering a payout once an pre-agreed threshold has been met.

Aditya Singh, head of Treaty at New Dawn Risk, commented: “Many global providers prefer parametric insurance, as it does not require them to understand the complexities of the inherent risks vis-à-vis the assets they invest in.

“This whitepaper discusses the fundamental ability of parametric insurance to cover products ranging from complex agricultural risks to property damage arising out of large natural catastrophe events.”