Legal considerations
RECONCILING INSURABLE INTEREST WITH PAYMENTS TO INTERESTED THIRD PARTIES
may take a wide view and find an insurable interest of a government in its territory and population or of an NGO in the people and places within its scope of operations. There are other interesting potential work-arounds. In China, parametric insurance products providing protection against drought have been arranged collectively at a regional government level, and reinsured by international players. Protection is then sold at a subsidised premium to individual farmers, who effectively become the policyholders and receive payouts directly. The farmers themselves clearly have an insurable interest although it is the government purchaser who has arranged and subsidised the insurance as a means of building local resilience within its populace.
Parametric insurance policies are often purchased by sovereigns or sub-sovereigns and are becoming increasingly popular with disaster relief and humanitarian organisations. Under English law it seems readily arguable that local, regional or even national governments have a direct insurable interest in the effects of a natural disaster on their populations, since without insurance backing they would have to fund the full cost of the disaster recovery from state funds and could be expected to suffer losses in tax revenue, for example. A non-governmental organisation (NGO) might have plans in place to intervene in a crisis (for example if crops were to fail) even though it is not the NGO itself that is suffering the loss directly. Here the “insurable interest” may be slightly more tenuous, although on balance such a purchaser would likely be able to show a legitimate interest in the cover, rather than it representing a mere speculation. Some jurisdictions
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