The global market for parametric insurance is expected to reach $29.3 billion by 2031, analysis from Allied Market Research showed, up from $11.7 billion in 2021
UK-based insurance broker Howden said on Tuesday it had created a new unit to focus on climate- and nature-related risk and support efforts to transition to a low-carbon economy and protect biodiversity.
The unit, Howden Climate Parametrics, will launch with more than 30 staff with experience across climate, analytics and advisory, structuring and placement, underwriting and capital markets, it said.
Parametric insurance is a small but growing area of the insurance market which sees pre-defined pay-outs triggered if a certain event occurs, for example temperatures remaining above 50 degrees Celsius (122°F) for three days in a row.
Often using satellite or other remote-sensing technology to confirm whether the payout should occur, money can be received more quickly than with traditional cover that may involve loss-adjusters visiting the site to confirm the money owed.
Increasingly being used by financial institutions to help hedge against weather, carbon or commodity risks, technical advances mean it can also be offered to previously hard-to-insure communities in emerging markets.
Howden, which employs 15,000 people globally, said the new unit would be co-led by Rowan Douglas – the recently-appointed CEO of the insurance broker’s Climate Risk and Resilience team based in London – and Philipp Kusche, global head of Insurance Linked Securities, Howden Tiger.
“Howden is scaling up and enhancing its capabilities to lead the market response to climate change,” Kusche in a statement.
Howden has previously helped set up a number of parametric deals including one to help protect the Jamaican Co-operative Credit Union League against non-repayment of micro loans from farmers in the event of extreme weather.
The global market for parametric insurance is expected to reach $29.3 billion by 2031, analysis from Allied Market Research showed, up from $11.7 billion in 2021.
Reinsurer Swiss Re previously reported that sales of parametric products jumped 40% between 2021 and August 2022.