InsTech report finds parametric insurance well on its way to being a $1 billion a year market

LONDON, June 23, 2022 /PRNewswire/ — A new report, ‘Parametric Insurance in 2022: the 150+ companies to watch’, by InsTech, has found that the parametric insurance market, which helps protect those impacted by measurable events such as storms, could now be worth as much as $1 billion in Gross Written Premiums.

InsTech surveyed 155 market participants working in parametric insurance and found that more than half were seeing 15%, or more, year-on-year growth.

The first half of 2022 saw $250 million of investment in parametric insurance-focused companies, already more than any other year. 2021 saw $116 million of investment, more than double the $43 million of 2020. The largest funding round to date for a parametric insurance focused company has been Descartes Underwriting with a $120 million Series B round in January 2022 that valued the firm, post-money, at $714 million.*

The most prominent use of parametric insurance has been to protect companies and the public sector against windstorms, earthquakes and drought. The InsTech report highlights Skyline Partners, Howden and Munich Re who have developed a parametric policy protecting farmers in Jamaica against hurricane risk. In June, the African Risk Capacity paid $19.7 million to Zambia and Malawi after droughts triggered their parametric policies.

Parametric solutions for flood, wildfire and hail risk have become more prominent in the last two years. ICEYE, which uses synthetic aperture radar satellites to estimate flood depth, is providing data to trigger parametric pay-outs from Descartes Underwriting and others. Earlier stage parametric solutions protect businesses against losses caused by cyber downtime, terrorism and pandemics.

The report also highlights where blockchain technology is being used for parametric insurance, such as Arbol’s parametric weather solutions which use smart contracts. The report includes a case study from blockchain oracle provider Chainlink.

Henry GaleResearch Analyst at InsTech said, “Advancements in data and technology are improving existing parametric insurance solutions and enabling new solutions to be offered. We are seeing a continuing stream of new entrants into the parametric insurance market being supported by early-stage investors. Meanwhile, the average funding per investment round is also increasing, driven by larger, later-stage rounds from earlier entrants which are now scaling up.”

Notes to Editor:

  • InsTech is a global insurance and technology company that identifies and supports the use of the best technology, data and analytics within insurance and risk-management.
  • Parametric (or index-based) insurance solutions are a type of insurance that pay out claims based on event triggers (eg a category 5 storm passing through a predetermined area such as a zone around a hotel in the Caribbean). It often pays out more quickly than traditional insurance policies because the policyholder’s loss does not need to be calculated, only the event needs to be measured for a pay-out to occur.
  • InsTech’s survey and analysis estimates that the gross written premiums for parametric insurance policies globally were between $500 million and $1 billion USD in 2021, with a central estimate of $750 million.
  • Gross Written Premiums (GWP) are the total premiums an insurer writes during a specific period before deductions for expenses such as ceding and commissions.
  • * Investment figures sourced from PitchBook and include companies whose primary business activity involves parametric insurance, as determined by InsTech.
  • All figures are $USD.

SOURCE InsTech

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