Parametric insurance: closing the protection gap

This paper explores the growth of parametric insurance and considers the important role it has to play in building resilience to natural catastrophes. With parametric triggers having been used in the capital markets for 20 years or more, this paper analyses some of the legal and regulatory challenges and considerations that arise as they are increasingly used in insurance.

This paper sets out to provide additional background to support the insurance industry as these parametric insurance products develop. One particular benefit of parametric insurance may be its role in helping to address and close the protection gap (the amount of economic loss that is not insured), which is significant in the developed world and huge in the developing world.