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PARAMETRIC INSURANCE CAN HELP CLOSE THE GAP
Technological developments and improved risk modelling have laid the groundwork to enable the take-up of parametric insurance to accelerate. The percentage of insurance that employs parametric triggers is growing. Clyde & Co offices around the world – particularly in Asia, Latin America and Africa – are seeing an uptick in requests for policy wording advice and regulatory guidance as parametrics increasingly enter the mainstream of insurers’ and reinsurers’ product portfolios.
The global protection gap can be narrowed in a number of ways and there is no simple or one-size-fits-all solution. But novel forms of risk transfer hold a lot of potential. Parametric insurance is one of those. By its nature, parametric insurance brings with it the ability to provide rapid funding for relief, recovery and reconstruction efforts, and so may have the greatest potential impact in countries most dramatically affected by natural perils and where the protection gap is currently large.
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