A review of published IDF parametric case studies: Findings and takeaways

This paper provides a summary review of the collection of parametric case studies that have been published throughout the last months. The paper highlights the key takeaways from these case studies, including how these solutions are already delivering rapid liquidity after disasters, and closing critical protection gaps. It also identifies four calls to action for the wider insurance industry:

The paper concludes that parametric products are set to play an increasing role in the expansion of pre-arranged financing to reduce the protection gap. Based on this stocktake, the IDF RMSG propose four actions to the insurance industry at large:  

1. Greater awareness raising in relation to parametric instruments: Several insurance industry stakeholders have written reports or papers on the potential for parametric insurance.
2. Balance complexity and transparency: Ensure that each context is considered in full (e.g. the needs of the insured, the complexity of the product, the accuracy of the payout, etc…) when designing a parametric product. 
3. Minimise basis risk: This is a key principle to making parametric products work for insured entities and to gain greater acceptance of these types of products within society.
4. Develop tools and checklists: Extending this to become a more detailed checklist that incorporates questions to ask of a provider and methods for assessing products would be beneficial to the wider uptake of these products.