Parametric insurance: The quick and transparent alternative to traditional cover

Parametric insurance, also known as index-based insurance, is a type of cover in which the insurance company and customer agree on a sum that will be paid out if a specific event occurs. The insurance company and the insured agree on a parametric index, assuming that when an event is of a certain magnitude, there is a high likelihood of financial loss for the insured. Another example is extreme heat income insurance, which aims to protect underserved communities from income loss due to harsh weather conditions such as heat waves. With its potential to mitigate financial losses and foster resilience, parametric insurance is poised to become an increasingly valuable tool in the modern business landscape.