The COVID-19 crisis has highlighted the need for new parametric insurance solutions, for both traditional and new risks, according to InsTech London’s report, published today.
InsTech London today published its report ‘Parametric Insurance – 2021 outlook and the companies to watch’, which highlights how parametric insurance is set to deliver on the promise of Insurtech and plug insurance protection gaps for individuals, SMEs, and corporates, worldwide.
Swiss Re estimated that in 2019 there was around $140bn of economic losses from natural and man-made disasters. Traditional insurance covered only $56bn (40%) of that. With the increasing risk from climate change and denser populations, losses will continue to rise. Without a new approach to conventional insurance, coverage for most of these costs will still not be recovered by those affected.
The report provides context around what parametric insurance can offer, where it has come from, and where next. Over 50 companies feature that are either demonstrating leadership in this space or are worth keeping an eye on for the future, covering everything from agriculture to cyber and reputational risks.
Matthew Grant, Partner of InsTech London, said: “Parametric insurance is one of the top 10 themes that we are focussing on. We’ve been watching this market develop, and the companies that are really making a difference, for over 20 years. The industry is now at a point where the data and technology are available at a cost that makes it accessible for new companies – or existing ones – to enter this space and help solve the problem of the uninsured and uninsurable.”
Technology now exists to define and deliver coverage based on real-time reporting of accurate data, with parametric insurance offering solutions where conventional insurance has failed. Parametric cover is now being considered across a wide spectrum of risk types and sizes, including earthquakes, hurricanes, and flooding. Triggers include shake density, wind speed, and water depths or rainfall. Flight delays, footfall, and hotel occupancy rates have also been used as indices or triggers for less traditional risks.
Some of the largest re-insurance organisations, most notably Munich Re, Swiss Re, and AXA, are structuring innovative placements and new companies are emerging and finding customers and investors within and outside of the insurance industry. Parametric insurance has now found its place at the risk transfer table, where it will fill some of the gaps left by traditional insurance solutions.
The report has been prepared by Matthew Grant, Partner at InsTech London, and Parmjeet Kaur, founder of InsurePro, with support from our sponsors and the broader Instech London community.