The term, parametric insurance describes a type of insurance contract that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses in a traditional indemnity policy. It is a non-traditional insurance product that offers pre-specified payouts based upon a trigger event. Trigger events depend on the nature of the parametric policy and can include environmental triggers, such as wind speed and rainfall measurements, business-related triggers such as foot traffic, and others.
Parametric insurance can cover risks that are not otherwise easily insurable, and allow for more scientific pricing of products that respond to specific isolated parameters, rather than the physical losses, which are expected to result from any number of a wide range of occurrences. In addition, parametric insurance for building resilience is that a policy is capable of being triggered, not by the calamity itself (such as crop failure or the resulting human impacts), but by its forebear (such as inadequate rainfall), which through funding early intervention can minimize wider human and financial impacts and costs. Therefore, these are some of the factors propelling the market growth. However, basis risk can arise if an individual insured’s loss experience does not correlate with the index payouts. In this case, some households that experience loss may not receive compensation while some who suffer no loss receive insurance payouts. Therefore, these are some of the major factors that limit the growth of the parametric insurance market. On the contrary, advances in technology have led to the new and exciting applications of parametric insurance principles which is emerging and growing faster than ever. Clients, brokers, insurers and investors have woken up to the possibilities of simpler, faster parametric insurance, and they are already experiencing the benefits. The rise in capital spending into parametric insurance firms is expected to fuel this growth.
The parametric insurance market is segmented on the basis of type, industry vertical, and region. By type, it is segmented into natural catastrophes, specialty insurance, and others. By industry vertical, it is segregated into agriculture, construction, mining, manufacturing, energy and utility, aerospace and defense, and others. By region, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA.
The report analyzes the profiles of key players operating in the parametric insurance market such as Allianz, AXA XL, Chubb, FloodFlash, Jumpstart Insurance Solutions, Inc., Berkshire Hathaway Specialty Insurance, Munich Re, Global Parametrics, Swiss Re, and Zurich American Insurance Company. These players have adopted various strategies to increase their market penetration and strengthen their position in the parametric insurance industry.
Parametric insurance can cover risks that are not otherwise easily insurable, and allow for more scientific pricing of products that respond to specific isolated parameters, rather than the physical losses, which are expected to result from any number of a wide range of occurrences. In addition, parametric insurance for building resilience is that a policy is capable of being triggered, not by the calamity itself (such as crop failure or the resulting human impacts), but by its forebear (such as inadequate rainfall), which through funding early intervention can minimize wider human and financial impacts and costs. Therefore, these are some of the factors propelling the market growth. However, basis risk can arise if an individual insured’s loss experience does not correlate with the index payouts. In this case, some households that experience loss may not receive compensation while some who suffer no loss receive insurance payouts. Therefore, these are some of the major factors that limit the growth of the parametric insurance market. On the contrary, advances in technology have led to the new and exciting applications of parametric insurance principles which is emerging and growing faster than ever. Clients, brokers, insurers and investors have woken up to the possibilities of simpler, faster parametric insurance, and they are already experiencing the benefits. The rise in capital spending into parametric insurance firms is expected to fuel this growth.
The parametric insurance market is segmented on the basis of type, industry vertical, and region. By type, it is segmented into natural catastrophes, specialty insurance, and others. By industry vertical, it is segregated into agriculture, construction, mining, manufacturing, energy and utility, aerospace and defense, and others. By region, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA.
The report analyzes the profiles of key players operating in the parametric insurance market such as Allianz, AXA XL, Chubb, FloodFlash, Jumpstart Insurance Solutions, Inc., Berkshire Hathaway Specialty Insurance, Munich Re, Global Parametrics, Swiss Re, and Zurich American Insurance Company. These players have adopted various strategies to increase their market penetration and strengthen their position in the parametric insurance industry.
Key Benefits For Stakeholders
- This report provides a quantitative analysis of the market segments, current trends, estimations, and dynamics of the parametric insurance market analysis from 2021 to 2031 to identify the prevailing parametric insurance market opportunity.
- The market research is offered along with information related to key drivers, restraints, and opportunities of parametric insurance coverage.
- Porter's five forces analysis highlights the potency of buyers and suppliers to enable stakeholders make profit-oriented business decisions and strengthen their supplier-buyer network.
- In-depth analysis of the parametric insurance market size segmentation assists to determine the prevailing market opportunities.
- Major countries in each region are mapped according to their revenue contribution to the global market.
- Market player positioning facilitates benchmarking and provides a clear understanding of the present position of the market players in parametric insurance market forecast.
- The report includes the analysis of the regional as well as global parametric insurance market trends, key players, market segments, application areas, and market growth strategies.
Key Market Segments
By Type
- Natural Catastrophes Insurance
- Specialty Insurance
- Others
By Industry Vertical
- Agriculture
- Aerospace Defense
- Mining
- Construction
- Energy Utiities
- Manufacturing
- Others
By Region
- North America
- U.S.
- Canada
- Europe
- United Kingdom
- Germany
- France
- Italy
- Spain
- Rest of Europe
- Asia-Pacific
- China
- Japan
- India
- Australia
- South Korea
- Rest of Asia-Pacific
- LAMEA
- Latin America
- Middle East
- Africa
Key Market Players
- Allianz
- AXA XL
- Chubb
- FloodFlash
- Jumpstart Insurance Solutions, Inc.
- Berkshire Hathaway Specialty Insurance
- Munich Re
- Global Parametrics
- Swiss Re
- Zurich American Insurance Company
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Table of Contents
CHAPTER 1: INTRODUCTION
CHAPTER 2: EXECUTIVE SUMMARY
CHAPTER 3: MARKET OVERVIEW
CHAPTER 4: PARAMETRIC INSURANCE MARKET, BY TYPE
CHAPTER 5: PARAMETRIC INSURANCE MARKET, BY INDUSTRY VERTICAL
CHAPTER 6: PARAMETRIC INSURANCE MARKET, BY REGION
CHAPTER 7: COMPANY LANDSCAPE
CHAPTER 8: COMPANY PROFILES
LIST OF TABLES
LIST OF FIGURES
Executive Summary
According to this report titled, 'Parametric Insurance Market,' the parametric insurance market was valued at $11.7 billion in 2021, and is estimated to reach $29.3 billion by 2031, growing at a CAGR of 9.9% from 2022 to 2031.Parametric insurance coverage differs from traditional insurance as it is not claims driven, with payouts made to customers after a loss. Instead, parametric insurance uses triggers or indexes (not claims) to payout after a specific event has occurred. Policyholders, therefore, are insured against a specific event with payments based on a predefined parameter, rather than the amount of a specific claim or loss. Parametric triggers can be applied to a range of loss types, from hotel occupancy rates to flight delays to the depth of a flood. Generally, a parametric contract includes the client, a specific parameter or index (the trigger), the contract or output (a payment amount), a third party or analytical agent responsible for verifying the trigger (i.e., a government agency), and the capital provider. Thus, these factors can be concluded as parametric insurance definition.
In recent years, insurtech entrants have helped incumbents recognize the need for innovation and flexibility when it comes to underwriting risk and creating new product solutions. Parametric insurance, which is powered by sophisticated analytics, new data sets, and innovative technologies, provides an opportunity for incumbents looking to supplement and evolve their approach to loss prevention/mitigation and disaster financing. Furthermore, parametric contracts solve a multitude of problems for insurers by protecting against economic losses and increase in risk awareness by sourcing additional capacity and providing liquidity through pre-defined payouts. In addition, it helps to develop embedded insurance products and micro-offerings in areas where traditional individual coverage is extremely limited or non-existent (for example, flight delay insurance), benefiting the parametric insurance market trends. Thus, these factors promote the growth of the parametric insurance industry.
The parametric insurance market is segmented on the basis of type, end user, and region. By type, it is segmented into natural catastrophes, specialty insurance, and others. By end user, it is segregated into agriculture, construction, mining, manufacturing, energy and utility, aerospace and defense, and others. By region, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA
On the basis of industry vertical, the construction segment is expected to grow at a fastest rate during the forecast period. This is attributed to the fact that traditional property damage plans ignore the impact of seasonal fluctuations in temperature, rainfall, or snow on a portfolio of construction projects, despite the fact that this cost is frequently significantly higher than the cost of repairing a structure after flooding or wind damage. Hence, the parametric insurance cover is increasingly helping contractors to mitigate weather related perils during construction and operations.
By region, the global parametric insurance market is being dominated by North America in 2021, and is expected to maintain this trend during the forecast period. This is attributed to the fact that parametric insurance has become a more feasible alternative for helping organizations create climate resilience and boost catastrophe response and recovery in places such as the U.S. and Canada. Moreover, insurance companies are increasingly expanding their parametric insurance business to North America, resulting in the growth of the market.
The parametric insurance market has been positively impacted by the COVID-19 outbreak. This is attributed to the fact that consumer trends toward parametric insurance are changing and key players in the market are adopting technologies, such as artificial intelligence-based solutions for claim processing & cognitive automation for real-time interaction with consumers. Moreover, to curb the spread of the virus, several insurance companies have streamlined their process of claim settlements and insurance services in the market. Furthermore, AI technology aids in tracking real-time insured data, allowing for better services during the pandemic. These factors, promote the parametric insurance market growth during the pandemic situation.
Key findings of the Study
- By type, the natural catastrophe segment led the parametric insurance market in terms of revenue in 2021.
- By industry vertical, the agriculture segment accounted for the highest parametric insurance market share in 2021.
- By region, North America generated the highest parametric insurance market size in 2021.
Companies Mentioned
- Allianz
- AXA XL
- Chubb
- FloodFlash
- Jumpstart Insurance Solutions, Inc.
- Berkshire Hathaway Specialty Insurance
- Munich Re
- Global Parametrics
- Swiss Re
- Zurich American Insurance Company
Methodology
The analyst offers exhaustive research and analysis based on a wide variety of factual inputs, which largely include interviews with industry participants, reliable statistics, and regional intelligence. The in-house industry experts play an instrumental role in designing analytic tools and models, tailored to the requirements of a particular industry segment. The primary research efforts include reaching out participants through mail, tele-conversations, referrals, professional networks, and face-to-face interactions.
They are also in professional corporate relations with various companies that allow them greater flexibility for reaching out to industry participants and commentators for interviews and discussions.
They also refer to a broad array of industry sources for their secondary research, which typically include; however, not limited to:
- Company SEC filings, annual reports, company websites, broker & financial reports, and investor presentations for competitive scenario and shape of the industry
- Scientific and technical writings for product information and related preemptions
- Regional government and statistical databases for macro analysis
- Authentic news articles and other related releases for market evaluation
- Internal and external proprietary databases, key market indicators, and relevant press releases for market estimates and forecast
Furthermore, the accuracy of the data will be analyzed and validated by conducting additional primaries with various industry experts and KOLs. They also provide robust post-sales support to clients.
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