In the ongoing struggle to come up with new products to cover catastrophe losses, there is one new twist worth watching–a derivative product that is triggered not by actual losses, but by a force of nature, regardless of the subsequent damage claims. Read on for details and let me know what you make of this initiative?

You can read full details about this so-called “parametric insurance” by clicking here.

But suffice it is to say that basically, the product pays off not when a certain amount of damage is confirmed, but when a certified level of wind speed, ground shake or flood water hits.

Earlier this month, at the annual Property-Casualty Insurance Industry Forum in New York, South Carolina Insurance Director Scott Richardson suggested settling disputed disaster losses under a similar coverage standard. It is an approach worth studying.

As reported by our own Susanne Sclafane (click here for the full story), Mr. Richardson would solve wind-versus-water debates with what he referred to as an indeterminate loss formula.

“This approach would use sophisticated models together with inputs such as wind speed, tides, depth and distance from water, to segregate wind and water losses rather than searching for watermarks after the fact,” Ms. Sclafane wrote.

What do you folks make of this?

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