Parametric insurance solutions

Innovative, tailored, turnkey risk transfer solutions
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  1. What we do
  2. How it works
  3. Why parametric insurance
  4. Case study
  5. Contact us

WHAT WE DO Bringing innovative and flexible solutions to our clients

We live in an uncertain world where a myriad of forces and risks can impact businesses and society at large. Buying traditional indemnity-based insurance to protect against some of those risks is not always efficient. That's why we've designed parametric protection insurance with simple trigger and payout mechanisms to speed up the claims payment process. Our innovative parametric solutions use customised formulas, so that once a pre-defined threshold is hit, we pay out.

HOW IT WORKS An insurance solution tailored to your needs

With conventional insurance, typically a premium is paid in return for a promise to cover a valid loss incurred due to an incident or named peril. Payment is made only after an actual loss assessment and investigation, with the goal to put the insured back in the position they were prior to the event.

Parametric insurance, on the other hand, is a type of insurance that provides the insured with a pre-determined payout that is based upon physical parameters of a concrete event. In other words, instead of insuring customers based on the magnitude of the actual losses incurred, parametric insurance solutions insure customers based on the intensity or magnitude of the actual event (e.g., the shake intensity of an earthquake). The payout itself depends on the occurrence of such a pre-defined triggering event. Such parametric risk transfer can serve a number of client needs and is commonly applied to gain protection from the financial impact of, for example, earthquakes, tropical cyclones, too much or too little rain, extreme temperatures, flooding, or crop yields (and other applications in the agriculture sector). In principle, any trusted and reliably measurable index can be used to define a parametric insurance product.

Triggering the future

Learn more about how parametric insurance solutions can strengthen public sector resilience.

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Why parametric insurance Coverage you can rely on

  • Fast payouts and no loss assessment required

    Parametric insurance allows for faster payouts based on an event’s independent and objective measurement – with no need for loss assessments or a proven network of loss adjusters. Besides, quick payouts allow the financing of the first rapid intervention measures and thus fund potential financial gaps in the aftermath of a catastrophic event.​

  • Customisation and broader coverage of risks

    Parametric insurance solutions can be tailored to your specific needs. They also allow us to insure risks that are otherwise uninsurable and to generally provide broader coverage, including of regions that have limited historical loss data or insurance penetration. For example, parametric insurance may allow for the inclusion of expenses for, among other things, first response activities after a disaster, loss mitigation, or clean-up.​

  • Benefitting from state-of-the-art data and technology

    We are at the forefront of technological developments, and it is our mission to relentlessly leverage state-of-the-art data and technology from leading providers to offer you protection for difficult-to-insure losses and to offer you alternative settlement processes (e.g., real-time payments, advanced payments). Parametric products are ideally placed to act as part of a fully digitised data and value chain.​

Case study Our expertise in action

  • This innovative insurance product allows New York City to optimise its resources and focus on helping low-to-moderate income communities to recover more quickly after a severe flooding event.

Further Information

New York City: Parametric flood cover

Assisting the City of New York to help vulnerable communities recover faster

The area surrounding New York City is increasingly prone to sea level rise and floods. Currently, 780,000 of New York City residents live within or directly adjacent to the 500-year floodplain. Low- to moderate-income residents are disproportionately affected and struggle to access financial resources to recover after a flood. The Center for NYC Neighborhoods (CNYCN) in partnership with the Mayor’s Office of Climate & Environmental Justice, the Environmental Defense Fund and SBP USA sought a solution to help better protect those residents from flood risk.

Swiss Re partnered with reinsurance broker, Guy Carpenter, and the data technology firm ICEYE to develop a parametric flood insurance policy that provides up to USD 1.1 million in emergency funding. The solution leverages high-resolution data obtained through a mix of real-time satellite data, on-the-ground real-time sensors, and social media. When a flood occurs, the percentage of each insured neighbourhood inundated by floodwaters is determined and if the percentage exceeds the agreed threshold, a payment is issued to CNYCN, who will subsequently distribute grants to households. This novel parametric insurance solution was awarded the Innovation Award at the 2023 Axco Global Insurance Awards.

Learn more about the NYC parametric flood cover.

Horn of Africa: Livestock protection

Strengthening the resilience of pastoralists against more frequent droughts 

Livestock is the main source of livelihood for many people in the Horn of Africa (HoA), one of the world’s poorest and most fragile regions. The HoA is home to about 50 million pastoralists, who are extremely poor. Climate change and resulting droughts, which are increasing in frequency and severity, pose an existential threat to them. The governments in the HoA region, together with the World Bank, wanted to improve the resilience of small-scale pastoralists and their buyer market access while fostering the local insurance markets.

To address this challenge, Swiss Re and other insurers worked with Zep Re and the World Bank to implement the Horn of Africa De-risking, Inclusion and Value Enhancement (DRIVE) project, which is a public-private partnership providing affordable, yet commercially viable access to insurance for pastoralists in Ethiopia, Djibouti, Kenya and Somalia. The programme was launched in August 2022 and features index-based livestock protection. Once the Normalized Difference Vegetation Index (NDVI), which is a widely-used metric for quantifying the health and density of vegetation using sensor data, reaches a certain threshold, insured pastoralists receive a payout. Advanced technology is leveraged for both insurance cover design and loss monitoring.

Learn more about livestock protection in the Horn of Africa.

Nepal: Parametric earthquake coverage

Enabling infrastructure investment with an innovative risk transfer solution

Nepal had opportunity for a 216-megawatt run-of-river hydropower project harnessing the power of the Trishuli River. But the 2015 Nepal earthquake severely hindered the progress of the project and made traditional insurers reluctant to provide earthquake coverage in a remote location of the dam. This lack of coverage negatively affected the project’s investment potential, which is why lenders required earthquake insurance in order to provide financial support for the project.

Swiss Re, in collaboration with the lead lender, the International Finance Corporation (IFC), and insurance advisor Aon, structured a parametric insurance cover that met the requirements of all stakeholders. The parametric insurance solution is triggered by the shaking intensity at the project site and based on shake maps provided by the United States Geological Survey (USGS). The coverage provides certainty for the full five-year construction period and allows for flexibility in adjusting the insured values year-on-year, thereby reflecting any potential delays or changes in the construction process.

Learn more about the Nepal earthquake cover.

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