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Policy Solution

All-risk parametric insurance

Funding and Financing

Case Studies

Summary

Parametric insurance bases payouts on the occurrence of pre-determined trigger events. The trigger is based on an index of weather or natural phenomena, which allows the policyholder to protect against the anticipated financial loss of the identified trigger without having to assess actual damage.

Implementation

Utilize parametric insurance to diversify and expand a risk pool. Parametric insurance can protect against a specific climate risk or support broader disaster risk reduction and adaptation.

Considerations for Use

Parametric insurance is a newer approach to managing risk and effectiveness is still being studied. Governments can use parametric insurance to manage catastrophic risk and finance disaster response. Parametric insurance payouts can be disbursed faster than traditional insurance claims because payouts are based on a preset formula.

Overview

  • Climate:

    Cold, Hot/Dry, Hot/Humid, Temperate

  • Policy Levers:

    Funding and FinancingThe allocation of public or philanthropic funding or private financing to implement projects, including risk transfer mechanisms.

  • Trigger Points:

    Preparatory measures (actions to establish authority to act)Actions to establish/ensure the authority to act when appropriate trigger-points occur.

  • Intervention Types:

    Planning/Policy

  • Sectors:

    Disaster Risk Management

Case Studies

Impact

  • Target Beneficiaries:

    Business owners, Property owners, Renters, Residents

  • Phase of Impact:

    Emergency response and management

  • Metrics:

    Change in index value, Difference of claims paid and actual losses

Implementation

  • Intervention Scale:

    Region, State/Province

  • Authority and Governance:

    National government, State/provincial government

  • Implementation Timeline:

    Short-term (1-2 Years)

  • Implementation Stakeholders:

    City government, Industry, National government, State/provincial government

  • Funding Sources:

    Private investment, Public investment

  • Capacity to Act:

    High

Benefits

  • Cost-Benefit:

    Medium

  • Public Good:

    N/A

  • GHG Reduction:

    N/A

  • Co-benefits (Climate/Environmental):

    N/A

  • Co-benefits (Social/Economic):

    Increase property values, Reduce poverty