Kennisbank / Parametric insurance – beyond indemnity

Parametric insurance – beyond indemnity

Magazine De Actuaris Schade Herverzekeren Risico-overdracht
Kennisbank •
Cole Mayer, Arno Gabriël MSc

In the actuarial curriculum the concept of indemnity is often presented as a cornerstone of non-life insurance. It means that the insurance cover puts the insured back in the same financial position as just before the loss, no better and no worse.

Parametric insurance – beyond indemnity

This matters because it prevents the insured from profiting from a loss (no moral hazard) and it aligns incentives between insurer and insured.


However, in cases where speed, clarity, and coverage of non-traditional costs matter more than perfectly matching actual ‘traditional’ loss experience, alternative risk transfer solutions exist in the form of parametric insurance. This is a common means of risk transfer in a mature market in the Americas and Asia. The take-up rate in Europe however is somewhat lagging behind. Therefore, it's about time we take a closer look.

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