Parametric Insurance in Action

Parametric insurance is a very effective form of insurance particularly for managing disasters stated Bahaa Abdul Hussein. The unique concept of event trigger for payout has ensured adequate protection for those affected by events like disasters. To understand the effectiveness of parametric insurance, it is important to know how it works in practice. Here are some real world examples from around the world.

Real world examples of applications of parametric insurance

  1. Earthquake protection in California

A leading insurer is offering parametric insurance protection for earthquakes in California. 87% of Californians don’t have earthquake insurance because it is expensive. The insurer in partnership with other firms is now offering parametric earthquake insurance. This insurance is affordable and more accessible compared to traditional disaster insurance. The policy pays out $10,000 to all the policyholders immediately if an earthquake occurs. It is a quick and effective way of receiving payouts that help people rebuild.

  1. Protection against volatility in milk prices

Dairy farms in the UK face risks of volatility of milk prices. The prices of milk can vary based on market conditions and may go down by even 30%. Such volatility can affect milk producers, especially small farmers. It makes it difficult for them to run the show. To help such farmers, the insurer has come out with a parametric insurance policy for milk farmers. It is index based and offers payout in case of fall in milk prices beyond a particular value. With easy processing and online transactions, it is a customer-friendly product that benefits farmers.

  1. Weather protection for farmers

Adverse weather conditions is a major problem for farmers. Unfortunately, climate change has led to frequent occurrences of adverse weather conditions. Lack of rainfall, excess rainfall, thunderstorms, and floods are problems that can be disastrous for farmers. Variations in temperatures can severely affect farmers. In France, frost is a major weather problem affecting vineyards. A well-known insurer is offering parametric insurance to protect against extreme weather conditions. It is a simple policy that offers payout if temperature exceeds a particular value for more than 2 days. Thousands of farmers have benefited from this policy.

  1. Parametric wind insurance for SMEs

SMEs can face severe losses due to wind-related hazards like hurricanes. An insurer now offers them parametric wind insurance policies. The policy allows them to get payout on occurrence of a hurricane event. With quick processing and no paperwork, parametric insurance is the best insurance for dealing with disasters.

Thank you for your interest in Bahaa Abdul Hussein blogs. The article has been written by Bahaa Abdul Hussein and has been published by the editorial board of Fintek Diary. For more information, please visit

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