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INNOVATING FOR SUCCESS
make commercially viable, or appealing to donors and state actors as part of risk mitigation strategies.
Commercial enterprises are also innovating in this area, building capacity and driving an increase in technological know-how. For example, Global Parametrics, a parametric risk transfer provider backed by a third- party capitalised risk fund, the German government and the UK’s Department for International Development, was launched last year. Its aim is to help increase penetration of insurance coverage for weather, catastrophes and natural disasters, by targeting clients and populations that currently do not have this type of protection. In March 2017 French insurance giant AXA announced the launch of AXA Global Parametrics. Having been focused on parametrics since 2014, AXA now has a dedicated parametric insurance department and has developed expertise in climate risks and worked with many different actors in various sectors across the world including weather-sensitive corporates in agriculture, renewable energy, construction, transportation, leisure and textile businesses, as well as with international institutions and governments. While parametric products develop, both for commercial purposes and for national and regional level disaster protection, their shape, scope and application are likely to evolve further - finding new risks that are currently uninsurable which they can
Likewise, how parametric products are treated in the law and by regulators will also evolve and become clearer as case law and precedent develops. However, with the amount of support from governments around the world, demand from buyers and the proven success of parametric insurance products, it is to be hoped and expected regulators and law makers will support and encourage the re- sponsible roll-out of parametric insurance rather than attempt to hold it back. Reflecting the growing international interest in the regulatory and legal landscape for such products, the International Association of Insurance Supervisors (IAIS) issued a draft issues paper on index-based insurances in November 2017 discussing some key issues surrounding insurable interest, accurate modelling, and consumer protections. With support and increased understand- ing, parametric insurance can fulfill its wide-ranging potential and, alongside traditional insurance and other novel forms of risk transfer, play a key part in closing the protection gap and strengthening global resilience.
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