
Background
Parametric cover has been an available, lesser known, market coverage for several years. It provides alternative financial protection against natural catastrophic events, including hurricane, tropical cyclone, earthquake, extreme temperature, rainfall, hail and frost, benefitting a wide range of industry types.
Traditional indemnity-based insurance products require the Insured to prove a loss has occurred, which is then assessed and adjusted prior to settlement. This all takes time, and in some cases, a great amount of time.
Parametric cover is different to this traditional coverage whereby once a threshold is reached payment is triggered automatically and normally settled within 7 days of the covered event, thus providing clients with necessary instant cash flow following an extreme event.
In some cases, Parametric cover may provide protection for events where there is limited or no cover available in the traditional insurance market, i.e., Contingent Business Interruption exposure.er event, thus providing clients with necessary instant cash flow t on the a

o build and index.
What is a parametric?
A policy that pays out structured limits when a confirmed event has occurred, and triggers are validated under the policy by a third-party adjudicator.
Clients still need an insurable interest as with any policy.
Underwriters aren’t necessarily interested in the actual details of the interest.
Underwriters build an index based on the historical data to form a loss cost base for their pricing.

Why buy?
Cash flow following a Catastrophic Natural Event with immediate access to funds – no waiting for a loss adjuster.
Policy doesn’t have a deductible so pays from first dollar
Traditional insurance is just not available or too expensive
Lack of market, e.g., contingent business interruption
What perils are offered: - (including but not limited to)
Hail
Earthquake
Wildfire
Frost
Rainfall
Extreme temperature
Who buys? (Some examples)
Mobile Home Parks – in the event of a large storm, the park could be decimated and the Insured will need cash flow to pay ongoing bills and staff, whilst waiting for losses to be paid by normal property insurers.
Condominiums – where windstorm premium is financially prohibitive due to location and/or construction type.
Builders’ Risks – Interesting locations where traditional cover limited or unavailable.
Caribbean Hotels – lack of traditional windstorm capacity available.
Beach front hotels – looking to protect their windstorm deductible or loss of attraction.
Winerys/Vineyards – Weather extremes, eg Frost, causing loss of crops.
Municipalities located in northern territories that want to protect their salt budget in the event of an extreme snow fall year.
Car dealerships located in hail areas.
Solar farm – lack of sunshine to protect the continuity of their revenue.
Airports – concerned about flooding due to excessive rainfall and having a revenue loss.
When to Buy
When cover is required against extreme events, e.g., Windstorm CAT 3, 4 or 5
No other options available
As a hedge to your main Insurance policy
Contingent business interruption
Protect your Windstorm deductible
Prior to known weather patterns.
What to buy
As much cover as you can afford
Largest radius in respect of cat in a circle
Highest pay out structure as you can afford
How do losses get paid?
Verification a loss has triggered the policy by the monitoring service is all that is needed.
There isn’t any physical inspection of the location being insured or loss adjusting required.
The Insurer will pay the loss to the client normally within 7 days of the loss being confirmed.
When doesn’t a loss get paid?
If the Insured suffers a physical damage loss, but the parametric trigger hasn’t been met, example: Cat in a circle with a cat 3 trigger and the storm which goes through the circle only reaches cat 2 !
What does a quote look like?
Parametric Wind – cat in a circle
Limit $ X,000,000
Radius 25 or 50 miles / Cat 3 and above
Payout: Cat 3 - 60% of X, Cat 4 - 75% of X and Cat 5 - 100% of X
What do we need to obtain a quote?
Address
Peril
Required Limit
Structure – i.e. circle radius, pay out structure
What’s the minimum premium
USD / CAD 62,500
Contact:-
Richard Daniel
Email: Richard.daniel@fenchurchbroking.com
Phone: +44 204 526 5269
David Price
Phone: +44 204 534 3751
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