[WEF] Can parametric insurance mitigate Africa’s climate risk?

[WEF] Parametric insurance is not a new concept. Such products and solutions have been in existence for more than 20 years. On the African continent, however, parametric insurance is relatively new but becoming ever more crucial to climate resilience.

Also called index-based insurance, parametric insurance differs from traditional insurance in that the payment of claims is based on modelled loss, which in turn is based on data. Instead of indemnifying for an actual loss, it offers pre-determined cover for a disastrous event, such as a cyclone, drought or flood.

The two major advantages of parametric insurance are that it enables rapid payment of claims, usually within a few days of the event happening; and it is highly scalable as an insurance programme and can be developed for any part of the world, as long as satellite data is available.