What are Parametric Insurance Benefits?
Parametric Insurance Benefits for Individuals
A parametric insurance policy for travel can provide a predetermined payout if a flight is delayed or cancelled due to illness or other unforeseen circumstances. This can provide financial protection for travelers to cover additional expenses, such as hotel stays and meals.
Parametric Insurance Benefits for SMEs, Enterprises and Governments
The benefits of parametric insurance in the face of climate-related disasters are significant and can be applied to various types of parametric insurance, including natural catastrophe coverage for individuals, SMEs, enterprises, and the government sector. Some of the key benefits of parametric insurance in the context of natural catastrophes are as follows:
1. Rapid Funding for Relief and Recovery Efforts: Parametric insurance brings the ability to provide rapid funding for relief, recovery, and reconstruction efforts in the aftermath of natural catastrophes. This can be particularly valuable for individuals, businesses, and communities impacted by events such as earthquakes, hurricanes, and flooding.
2. Closing the Protection Gap: Parametric insurance can help address and close the protection gap, which is the amount of economic loss that isn't insured. By its nature, parametric insurance brings the ability to provide rapid funding for relief, recovery, and reconstruction efforts, thus contributing to closing the protection gap.
3. Tailored Coverage and Clear Claims Definition: Through parametric insurance, risk managers can clearly define events that will, and will not, pay claims, as well as the sum of those claims. This provides tailored coverage and clear claims definition, which can be advantageous for individuals, SMEs, enterprises, and the government sector.
4. Transfer of Risk to the Financial Market: Parametric insurance allows for the transfer of risk to the financial market, for which the individual, government, or entity pays a premium. This can be beneficial for managing the financial impact of climate risks and natural catastrophes.
5. Complement to Traditional Property Coverage: Parametric insurance is considered a complement to traditional property coverage, offering a different approach to risk transfer and financial protection. This can provide additional support and resilience in the face of climate-related disasters.
These benefits are applicable to various types of parametric insurance, including coverage for individuals, SMEs, enterprises, and the government sector, and they underscore the value of parametric insurance in providing rapid and reliable financial support in the event of natural catastrophes.