Parametric insurance can be defined as cover that is triggered by a parameter i.e. a metric or an index. In our case, a Bounce policy is triggered by an earthquake event with an intensity measure of 20cm/second of ground motion - that is our parameter. We use GeoNet strong motion sensors to inform us when our customers are impacted by a quake.
The attached article "What is parametric insurance" by Bethan Moorcraft from Insurance Business provides an excellent explanation of parametric insurance.
The article explains that customers are more sophisticated in how they think about insurance and they understand some of the limitations of a traditional insurance policy. Parametric insurance has been described as an elegant solution for risk-transfer and is an attractive alternative or enhancement to some traditional policies.
For brokers and risk managers, parametric solutions becomes another tool in your tool box that allows you to offer a more complete risk transfer service for your customers by closing any gaps and providing further peace of mind alongside enhanced business continuity.