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parametric insurance

Index insurance is having a development impact where it’s needed most

Ceyla Pazarbasioglu's picture
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Many of the world’s populations are vulnerable to climate shocks – to drought, flooding, irregular rainfall and natural disasters. For these countries, cities and communities, index-based insurance is a critical risk-management tool which allows victims of such shocks to continue to have access to finance and to build resilience against future risks.

Index, or parametric, insurance pays out benefits based on a pre-determined index for the loss of assets and investments as a result of weather or other catastrophic events. In contrast, traditional insurance relies on  assessments of the actual damage.