Closing the protection gap with parametric hurricane insurance in the U.S.

Parametric insurance may help property owners repair damage more quickly after a natural disaster. (Photo: Shutterstock)

Although we tend to think of emerging markets as underinsured, it may surprise you to know the United States also has a sizeable protection gap in the difference between total economic losses and insured losses. The problem is magnified by natural catastrophes. Windstorms and earthquakes can cause damage to a wide range of assets that aren’t insured, forcing people to pay for losses that aren’t covered.

In developing nations, parametric insurance is helping close the gap by providing rapid payouts with minimal claims intervention. One such example is a business interruption coverage offered by MiCRO and Swiss Re in Guatemala. That model can be adapted in developed nations and is already showing tremendous potential in places where extreme weather events are a statistical certainty.