Parametric covers are alternative risk solutions provided by insurance and reinsurance companies that enable organizations to finance or to transfer risk in a non-traditional way. Coverage is triggered based on reaching specific thresholds such as sustained winds of a set speed in miles per hour, providing important protection to pave the way toward recovery from weather disasters, including windstorms and flooding, according to Tom Markovic, Senior Vice President, Financial Risk Products, Marsh, and Steve Harry, Marsh Risk Analytics.
As climate-related weather risks become increasingly complex and unpredictable, the requests for such innovative parametric insurance structures have been increasing. Parametric Insurance: a Tool to Increase Climate Resilience from Marsh McLennan provides more information about how this coverage can complement traditional indemnity policies.