InsTech report finds parametric insurance on track to become $ 1 billion a year

LONDON, June 23, 2022 / PRNewswire / – A new report “Parametric insurance in 2022: over 150 companies to watch” by InsTech, found that the parametric insurance market, which helps protect those affected by measurable events such as storms, it can already be worth as much $ 1 billion in gross written premiums.

InsTech surveyed 155 market participants working in parametric insurance and found that more than half recorded 15% or more growth on an annual basis.

In the first half of 2022 $ 250 million of investments in companies focused on parametric insurance, more than any other year. 2021 seen $ 116 million an investment more than twice as large $ 43 million from 2020. The largest round of financing so far for a company focused on parametric insurance is Descartes insurance with $ 120 million Series B round January 2022 who value the company, after money, on $ 714 million. *

The most well-known use of parametric insurance is to protect companies and the public sector against storms, earthquakes and drought. The InsTech report highlights Skyline Partners, Howden and Munich Re, which have developed a parametric policy to protect farmers in Jamaica against the risk of hurricanes. In June, Africa’s risk capital paid off $ 19.7 million to Zambia and Malawi after droughts triggered their parametric policies.

Parametric solutions to the risk of floods, forest fires and hail have become more noticeable in the last two years. ICEYE, which uses synthetic aperture radar satellites to estimate flood depth, provides data to trigger parametric payouts from Descartes Underwriting and others. Early parametric solutions protect businesses from cyber losses, terrorism and pandemics.

The report also highlights where blockchain technology is used for parametric insurance, such as Arbol’s parametric solutions that use smart contracts. The report includes a case from blockchain provider oracle Chainlink.

Henry Galethe research analyst at InsTech said “Advances in data and technology improve existing parametric insurance solutions and enable new solutions to be offered. We see a steady stream of new entrants in the parametric insurance market, supported by investors at an early stage. Meanwhile, the average funding per investment circle is also increasing, driven by larger circles at a later stage by earlier participants, which are now increasing. “

Notes to the editor:

  • InsTech is a global insurance and technology company that identifies and maintains the use of the best technology, data and analysis in insurance and risk management.

  • Parametric (or index-based) insurance solutions are a type of insurance that pays claims based on the triggering of an event (eg a Category 5 storm passing through a predetermined area, such as an area around a hotel in The Caribbean). It often pays off faster than traditional insurance policies, as the loss of the policyholder does not have to be calculated, only the event has to be measured for the payout to happen.

  • InsTech’s research and analysis estimates that gross written premiums for parametric insurance policies worldwide are between $ 500 million and $ 1 billion in 2021, with a central assessment of $ 750 million.

  • Gross written premiums (GWP) are the total premiums that the insurer writes during a certain period before deductions for expenses such as assignments and commissions.

  • * Investment data is derived from PitchBook and includes companies whose core business includes parametric insurance as defined by InsTech.

  • All figures are $ USD.

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