Parametric insurance crucial for closing $1.8 trillion protection gap: Generali & UNDP

Parametric insurance is key for closing the US$1.8trillion protection gap for communities and countries on the frontlines of interrelated crises, including climate change, according to Generali and the United Nations Development Programme (UNDP).

Generali has produced a report with the UNDP, highlighting how parametric insurance can support governments, businesses and communities across the globe to financially prepare for increasingly frequent and severe natural hazards, from drought, extreme heat and tropical cyclones to storm surges, earthquakes and more.

The report contains seven case studies, which clearly demonstrate how parametric insurance solutions are contributing to improved financial resilience for households, organisations and global value chains.

One case study notes how in Malawi drought poses a threat to agriculture for 80% of the population. While in Mexico, only 22% of the losses caused by the 2017 earthquake losses were covered by insurance, which clearly exposes the social services safety net of a country where 36% of the population lived in poverty in 2022.

These are just a couple of examples of case studies (from Generali Global Corporate & Commercial, Descartes Underwriting, African Risk Capacity, Blue Marble, CelsiusPro, Swiss Re and WTW), that showcase how parametric insurance solutions can help improve the financial resilience of affected countries.

Importantly, the partnership between Generali and the UNDP has an ongoing commitment to scale financial protection by fostering wider public-private collaboration.

As well as this, the report also includes a range of tools that are designed to make parametric insurance more accessible for those who are interested in understanding how it can be part of a broader risk management strategy.

This includes a checklist for governments and organisations, considering parametric insurance, from identification of key economic sectors to better understanding the claims process.

Furthermore, the report also provides a selection of recommendations on how governments, businesses and insurers can work together to create the kind of ecosystem necessary to support the growth of parametric insurance as a tool to protect vulnerable communities.

Christian Kanu, CEO of Generali Global Corporate & Commercial (GC&C), commented: “This report demonstrates our commitment to addressing the protection gap by offering innovative insurance solutions that can strengthen the resilience of underinsured communities in many regions of the world. Parametric insurance can be transformative, providing cost-effective, efficient risk coverage to those previously unreachable by traditional insurance.

“Consequentially, this helps communities and businesses cope with natural hazards and operational interruptions. At Generali GC&C, we are proud to be the Group’s center of excellence for parametric insurance, and we will continue striving to be Lifetime Partners for our clients.”

Jan Kellett, Global and Corporate Lead on Insurance and Risk Finance at UNDP, said: “Of critical importance to this work is the role of government. Our joint UNDP-Generali report makes one thing clear – the insurance industry cannot scale parametric solutions to build financial resilience without the appropriate ecosystem. Development actors must significantly increase efforts to establish supportive regulations and policies that allow parametric insurance to contribute meaningfully to closing the financial protection gap.”

Earlier this year, Reinsurance News ran a poll which revealed that the main obstacles to the global adoption of parametric insurance are the lack of available data and models, along with inadequate education about these solutions.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.