Interest in parametric insurance coverage is growing

While Florida businesses work to reclaim a sense of normalcy in their operations, they should also be taking this time to look to the future and re-evaluate how they manage property risk. Parametric insurance policies may be a new alternative to a hard property insurance market. (Credit: Mia2you/Shutterstock.com)

As the property insurance market continues to harden with rising rates, underwriting criteria getting stricter and insurers writing fewer policies, parametric insurance may be an option for property owners and operators. Parametric has enormous potential to help close the protection gap — to begin covering severe, low-frequency risks that until now have gone largely unprotected.

Unlike traditional property coverage, parametric insurance does not indemnify the pure loss but rather issues a set payment upon the occurrence of a triggering event, such as a hurricane of a specific intensity. Sometimes referred to as index-based insurance, this type of coverage is reaching a new level of popularity as organizations look for additional alternative risk transfer options.