According to a recent Reinsurance News poll, over 80% of industry respondents anticipate the use of parametric triggers in reinsurance arrangements to rise in 2024.
Parametric news has featured heavily in our pages so far this year, though admittedly, this has been largely insurance-related.
For example, speaking in an interview with Reinsurance News, Martin Hotz, Head Parametric Nat Cat, Swiss Re Corporate Solutions, suggested that the demand for parametric insurance will continue to rise in 2024, as “there is no fine print in a parametric policy, which clients appreciate in these uncertain times.”
According to Hotz, the demand for parametric insurance has been “rising steadily” in recent years, and he expects this to continue this year.
“The three main qualities of parametric insurance are speed, flexibility in the use of payouts and transparency,” he explained.
He also observed that advances in technology and data collection mean that the parametric value proposition is “becoming ever more compelling” as monitoring and measurement of the natural world becomes ever more precise.
In our view, there has also been a growing interest in the reinsurance market, which was reiterated in our poll, with 82% of over 200 industry respondents stating they expect the use of parametric triggers in reinsurance arrangements to rise in 2024.
Commenting on the poll, Skyline Partners, a UK Insurtech company specialising in parametric insurance said, “We’re particularly excited about the potential for parametric reinsurance. The flexibility, incredibly rapid payment, and – critically – availability of capacity for peak perils risks all make parametric a powerful alternative. That’s why it’s gaining greater traction every day.”
As we understand, there has also been growing interest in parametric reinsurance as a way to secure coverage at different layers of the tower through the hard market, with buyers aware it can fill in gaps in coverage, or help them reduce their traditional purchase in areas where a parametric can be cost-effective.
We have also seen some appetite among buyers to utilise parametric products as a retro reinsurance alternative, with brokers pitching them as a product that can play a similar role to an industry-loss warranty (ILW), including for buyers at insurance-linked securities (ILS) funds.
Stay tuned into Reinsurance News for an upcoming interview with Megan Linkin, Senior Parametric Nat Cat Structurer, Swiss Re Corporate Solutions, in which she discussed how the non-traditional product can be an effective tool to address earthquakes.
