Page 50 - The Insurance Times November 2025

Definition of Key Terms 1. Philippines – Swiss Re’s Typhoon Parametric Cover
Swiss Re designed a parametric catastrophe risk
Parametric Insurance: A non-traditional insurance prod-
uct that pays a fixed amount based on the occurrence transfer solution for the Philippine government
or intensity of a triggering event rather than on actual under the Global Shield Initiative.
loss assessment. Payouts are triggered automatically when wind
Trigger Parameter: A measurable index such as rainfall, speeds exceed 150 km/h within designated regions.
wind speed, temperature, or earthquake magnitude The cover enables immediate liquidity to fund re-
that defines when a payout is due. lief operations within 10–14 days, compared to
Basis Risk: The risk that the payout under the paramet- months under traditional models.
ric policy does not perfectly match the actual loss ex- 2. Kenya – AXA Climate & World Bank Drought Index
perienced.
The Kenya Livestock Insurance Program (KLIP) uses
Index-Based Insurance: Another term for parametric satellite-based vegetation indices to monitor
insurance, often used in agriculture and weather-risk drought.
contexts.
When vegetation drops below pre-set levels (indi-
Payout Threshold: The level of the parameter (e.g., cating forage scarcity), payouts are triggered au-
300 mm rainfall) at which compensation becomes pay- tomatically to affected pastoralists.
able.
Thousands of families now receive quick financial
support to replace lost animals or buy feed.
The Problem
3. India – Weather-Based Crop Insurance Scheme
Challenge Faced by Clients
(WBCIS)
The Philippines, Kenya, and India are among the most cli- Introduced by the Government of India and imple-
mate-vulnerable countries globally. Frequent typhoons,
droughts, and irregular rainfall patterns cause recurring mented by multiple insurers and state agencies.
economic losses, disproportionately affecting farmers, SMEs, Weather stations record rainfall, humidity, tem-
and low-income households. perature, and wind speed.
If deviation exceeds specified limits, farmers receive
For example: automatic payouts credited directly to their ac-
In India, small farmers faced losses exceeding ?30,000 counts.
crore annually due to erratic monsoons and delayed
compensation under indemnity-based crop insurance.
The Results – Outcomes and Data Analy-
In the Philippines, typhoons such as Haiyan (2013) and
Rai (2021) caused multi-billion-dollar damages, over- sis
whelming both insurers and government disaster funds. 1. Faster Claim Settlements:
Under parametric schemes, payouts are processed
In Kenya, recurrent droughts severely affected livestock
and crop yields, threatening food security. within 10–15 days post-event, compared to 60–90
days for traditional indemnity insurance.
The core issue was the lack of timely financial relief—tradi- 2. Increased Participation:
tional insurance payouts arrived months after the disaster, In India, over 25 million farmers have benefited
when recovery had already become difficult or impossible. from the WBCIS scheme since inception.
In Kenya, parametric drought covers have ex-
The Solution – Parametric Insurance panded to 22 counties, protecting over 500,000
Implementation livestock herders.

Approach 3. Improved Disaster Resilience:
To overcome these limitations, insurers and reinsurers in- Quick liquidity helps governments and communities
troduced parametric models linked to specific climate and recover faster, reducing dependence on emergency
seismic data sources. relief or debt.

The Insurance Times November 2025 45