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In the current hard real estate insurance market—in which rates are rising, underwriting criteria is stricter and insurers are writing fewer policies—parametric insurance may be an option for property owners and operators. Parametric has enormous potential to help close the protection gap—to begin covering severe, low-frequency risks that until now have gone largely unprotected.

Unlike traditional property coverage, parametric insurance does not indemnify the pure loss, but rather issues a set payment upon the occurrence of a triggering event, such as a hurricane of a specific intensity. Sometimes referred to as index-based insurance, this type of coverage is reaching a new level of popularity as organizations look for additional alternative risk transfer options.

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