The Global Parametric Insurance Market size is expected to reach $21.4 billion by 2028, rising at a market growth of 9.6% CAGR during the forecast period.
Parametric insurance is a type of insurance solution, which covers the likelihood that a preset event will occur rather than compensating for actual losses. Secondly, the definition of parametric insurance is an agreement to pay an amount in the case of a triggering event; as such, it is not connected to any actual physical asset or component of the infrastructure. If pre-defined event parameters measured by an objective variable or index linked to a specific exposure of an insured are met or exceeded, the insurance coverage is activated.
The purpose of parametric coverage is to speed up recovery rather than to replace traditional insurance. They can be created to cover both individual massive losses and frequency losses, such as the effects of reduced snowfall or economic interruptions brought on by hurricanes. To get the greatest outcomes, it is crucial to think about how standard indemnity plans might be combined with parametric alternatives.
In order to help businesses finance or manage risks in a non-traditional manner, reinsurance and insurance companies offer parametric covers, which are alternative risk solutions. The solutions are based on specified triggers or payment systems and revolve around a quantifiable index; no actual physical harm needs to be done for them to work. The demand for such cutting-edge parametric insurance systems has been rising as climate-related meteorological risks become more complicated and unpredictable.
The COVId-19 pandemic had a positive effect on the market for parametric insurance since it raised awareness and led to a growth in adoption by companies with a wider range of risk exposure. The necessity for new parametric financial products for both conventional and novel risks has been made clear by the pandemic problem. Even if their insurance policies included a business interruption clause, the majority of companies understood that it did not provide insurance protection against pandemics. The introduction of parametric insurance resulted from this. This further would fuel the market growth.
Due to the lower prices, parametric insurance is growing in popularity. Customers are drawn to parametric insurance because of its affordable premiums since they want to protect their property from unanticipated financial losses or damage. Additionally, it is tailored to a customer's budget or bundled with indemnity insurance to close any gaps in coverage. Actual post-event costs are substantial and infrequently expected or budgeted, particularly for governmental institutions tasked with rebuilding a region after a tragedy. The insured may have more financial freedom with parametric insurance.
Policies with parametric insurance allow for speedy payouts. For firms to recuperate from a disastrous catastrophe, this may be essential. The insured also understands that this payment is guaranteed because it is based on specific, predetermined conditions. One more implication is that the compensation specified in the insurance will happen even if the insured suffers no harm at all or very little damage.
The basis risk is higher with parametric insurance because it bases risk determination on pre-established parameters. In insurance, the idea of risk premium is essential. Basis risk is the situation when an insurance policy does not cover a loss occurrence. Additionally, parametric insurance payments are frequently outlined using indices. As a result, there is a chance that someone covered by it could sustain a loss yet not be compensated since some requirements weren't completed. It is plausible that the policyholder will not receive any compensation at all.
Based on type, the parametric insurance market is divided into natural catastrophes insurance, specialty insurance, and others. The specialty insurance segment procured a significant revenue share in the parametric insurance market in 2021. The advent of parametric insurance has grown beyond the natural calamities' claim. One such specialty parametric is Hybrid coverage which requires that both an indemnity requirement (evidence of loss) and a parametric condition (pre-defined event parameters) be satisfied before the policy will pay out. These policies are set up like insurance contracts.
On the basis of industry vertical, the parametric insurance market is categorized into agriculture, aerospace & defense, mining, construction, energy & utilities, manufacturing, and others. The agriculture segment acquired the highest revenue share in the parametric insurance market in 2021. This is a result of new insurance legislation that helps close protection gaps by including circumstances that weren't previously insurable. Agri-food systems must be robust worldwide due to the effects of climate change, and disaster preparedness is a crucial component of climate change adaptation. The use of parametric insurance is crucial in these efforts since it is closely related to societal disaster resilience.
| Report Attribute | Details |
|---|---|
| Market size value in 2021 | USD 11.2 Billion |
| Market size forecast in 2028 | USD 21.4 Billion |
| Base Year | 2021 |
| Historical Period | 2018 to 2020 |
| Forecast Period | 2022 to 2028 |
| Revenue Growth Rate | CAGR of 9.6% from 2022 to 2028 |
| Number of Pages | 201 |
| Number of Tables | 303 |
| Report coverage | Market Trends, Revenue Estimation and Forecast, Segmentation Analysis, Regional and Country Breakdown, Competitive Landscape, Companies Strategic Developments, Company Profiling |
| Segments covered | Type, Vertical, Region |
| Country scope | US, Canada, Mexico, Germany, UK, France, Russia, Spain, Italy, China, Japan, India, South Korea, Singapore, Malaysia, Brazil, Argentina, UAE, Saudi Arabia, South Africa, Nigeria |
| Growth Drivers |
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| Restraints |
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Based on region, the parametric insurance market is analyzed across North America, Europe, Asia Pacific, and LAMEA. North America dominated the parametric insurance market with the highest revenue share in 2021. This is because of the size and intensity of weather-related climate events, which have been worse and more irregular in North America, driving up the demand for parametric coverings. Extreme weather events are becoming more often and more intense in communities all around the United States, and many of them are being made worse by climate change.
Free Valuable Insights: Global Parametric Insurance Market size to reach USD 21.4 Billion by 2028
The major strategies followed by the market participants are Acquisition. Based on the Analysis presented in the Cardinal matrix; Berkshire Hathaway, Inc. is the major forerunners in the Parametric Insurance Market. Companies such as AXA SA, Chubb Limited and Zurich Insurance Group Ltd. are some of the key innovators in Parametric Insurance Market.
The market research report covers the analysis of key stake holders of the market. Key companies profiled in the report include Allianz Group, AXA SA, Zurich Insurance Group Ltd., Berkshire Hathaway, Inc., Chubb Limited, Munich Re Group, FloodFlash Limited, Neptune Flood Incorporated, Global Parametrics Limited and Swiss Re.
By Type
By Vertical
By Geography
The global Parametric Insurance Market size is expected to reach $21.4 billion by 2028.
Budget-Friendly Policy Costs and Expansive Policies for Clients are driving the market in coming years, however, Uncertainty of Events and Loss Determination for Basis Risk restraints the growth of the market.
Allianz Group, AXA SA, Zurich Insurance Group Ltd., Berkshire Hathaway, Inc., Chubb Limited, Munich Re Group, FloodFlash Limited, Neptune Flood Incorporated, Global Parametrics Limited and Swiss Re.
The expected CAGR of the Parametric Insurance Market is 9.6% from 2022 to 2028.
The Natural Catastrophes Insurance market is generating high revenue in the Global Parametric Insurance Market by Type in 2021, thereby, achieving a market value of $13.6 billion by 2028.
The North America is the fastest growing region in the Global Parametric Insurance Market by Region in 2021, thereby, achieving a market value of $7.8 billion by 2028.
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