Parametric Insurance, A New Approach to Risk Management
Parametric insurance is a modern form of insurance coverage based on predefined data or “parameters” such as temperature, earthquake magnitude, rainfall level, or wind speed. In essence, it’s a type of insurance that covers the occurrence of a pre-agreed-upon event (like an earthquake, weather event, or forest fire), rather than the actual damage resulting from it, which makes the scope of coverage much broader.
Unlike traditional insurance, the payout does not depend on a damage assessment. Instead, it is automatically triggered when the specified parameters are exceeded.
A clear example of this is the Santorini/Amorgos earthquakes in January-February 2025. There was no damage to buildings, so the fire and perils policies that owners may have had were not activated. However, tourism businesses could have faced huge financial losses from tenants’ hurried departures or booking cancellations. A parametric policy would have been activated and would have fully compensated for the financial loss of the insured.
This approach ensures:
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Speedy payouts
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Transparency and simplicity in the process
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Effective protection against risks that are difficult to measure or are catastrophic
Parametric insurance is particularly suitable for businesses and organizations that are exposed to natural hazards (e.g., agricultural businesses, tourism enterprises, infrastructure) and seek immediate liquidity in times of crisis.
Meet DAES
With almost half a century of experience in the field of Insurance and insurance mediation, we created DAES, a special scheme that highlights and enriches the insurance industry, through our specialized services.
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We are changing the way risk insurance is handled by applying standards found in niche leading markets. Talk to us now and find solutions to all the insurance issues that interest you.
