In this Risk in Context podcast episode, Marsh’s Michael Rouse, US Property Practice Leader, and Chad Wright, Managing Director and Senior Client Executive, discuss a variety of ways to manage catastrophe risk, including the use of parametric solutions. The podcast is included in Marsh McLennan’s handbook, Triggering Change: Parametric Solutions for Climate Resilience. Guy Carpenter and Marsh are businesses of Marsh McLennan.
While property policies require that losses be reported, assessed and adjusted in an often-lengthy process, parametric policies have a predefined trigger that offers a more straightforward and potentially quicker claims process.
“Parametric coverage can really be a good fit for insureds whose exposures are actually greater than their physical values,” Chad said. “For example, if you have a lot of exposure to infrastructure—like ports, rails, bridges, airports—you could be in a professional services business where your office values are not really representative of what your exposures are, you could have macroeconomic exposures that are greater because you might be located in a metropolitan area.”
Parametric solutions are often used as a complement to conventional property and business interruption policies.
“Leveraging all parts of an insured’s organization to really understand the risk, to make sure there's a comprehensive understanding around the data and the quality of the data, I think is also really important when we think about structuring parametrics and really just placing any type of traditional all-risk cover,” Michael said.