Parametric Insurance for Natural Disasters: Frequently Asked Questions

Congressional Research Service. (2024). Parametric Insurance for Natural Disasters: Frequently Asked Questions: Frequently Asked Questions.

Type

Report

Intellectual base

Grey literature

Year

2024

Link

https://www.congress.gov/crs-product/IN12670

Cited from

law_governance

Cited by

1 citation across 1 artifact.

Each citation links to the sentence it supports in the citing article.

Primes

• Threshold-Triggered Rule Activation
  • Insurance. Parametric triggers pay a large discrete sum when an objective index — windspeed, magnitude, rainfall — inches across a pre-specified value.

    This sourceDocuments parametric insurance, in which a pre-agreed payout is triggered when an objective index (wind speed, earthquake magnitude, rainfall) crosses a pre-specified value verified by an impartial third party.

    Supported in partVerified against the work's full text

    The source defines parametric, or index-based, insurance as a contract “paying a pre-agreed amount based on the magnitude of the event, as opposed to the size of losses”, with the payout “set according to an objective measure of the event rather than the cost of damage sustained”. Its example pays a pre-determined amount if a named storm's wind speeds exceed 80 mph in a defined area, and it also describes coverage for flooding from excess rainfall. The source does not describe the sum as large, and elsewhere frames payouts as scaled to event magnitude rather than the all-or-nothing form the sentence's discrete implies.

    “Parametric (or index-based) insurance is a type of insurance contract that insures a policyholder against the occurrence of a specific disaster event by paying a pre-agreed amount based on the magnitude of the event, as opposed to the size of losses. The amount of the payout is set according to an objective measure of the event rather than the cost of damage sustained.”

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