Parametric Insurance

Bridging the Coverage Gap with Parametric Insurance Solutions

Costero is able to access a broad range of Parametric Insurance solutions developed by London and Global Parametric and Technology providers that are innovating constantly and have significant appetite for growth across a multitude of industries and perils. We work closely with our clients to understand their risk exposures and the data that is critical to their business, and then access these providers to build the right solution to augment their traditional insurance program.

How It Works

A parametric policy is simply: “if this happens, then this is paid”. The policy agrees to pay a claim based on the occurrence of a parameter exceeding a pre-agreed level, which is correlated to a client’s exposure. An example parameter could be flood water reaching an agreed height, or wind reaching an agreed sustained speed within range of an insured’s assets, causing damage to property.

Importantly, due to the fact that all parameters and payouts are agreed at inception, if a policy is triggered during the period, the claim can be paid as soon as the event is verified using independent / 3rd party data (possibly within 24 hours) which provides access to critical cashflow and emergency funding when our clients need it most.

Parametric insurance can provide a solution for excess catastrophe exposure, or lower, ground up limits/deductible covers. Both usually complement traditional insurance policies/products. It also covers non-traditional and Non-Damage BI & Contingency exposures, and can provide stand-alone catastrophe cover.

Summary of Benefits

Summary of Covered Perils

Underwriting Process

Although parametric insurance streamlines the claims process, the quoting process may take longer than indemnity insurance. Businesses should start the process well in advance of when they need coverage.

Furthermore, terms are generally open for 30 days because of the limited number of carriers offering coverage for certain perils in a geographic area. Quoted terms may be withdrawn with short notice when they hit their coverage limit. For example, if you need wildfire coverage for your vineyard but all the neighbouring wineries have already purchased coverage, the carrier may have reached its aggregate limit and be unwilling to provide any more coverage in the area. Additionally, rates may increase as the season approaches. For these reasons, it’s important to begin the process as early as possible.

Businesses interested in parametric coverage need to supply the necessary information, including the following:

• Name of the Insured
• Risk Location
• Total Value of the Asset/Portfolio
• Limit to Be Insured under the Parametric Policy
• Target/Budget Premium
• Loss History
• Confirmation of Acceptability by Client/Lender

Who Needs Parametric Insurance? 

Parametric insurance is suitable for businesses with significant risks that traditional insurance excludes or may not adequately cover. The typical premium threshold is $100,000 for any single opportunity.