Issue remains over whether products should be characterised as
insurance or derivatives
Parametric insurance products have become established
internationally as a significant product segment, with some
estimates of global parametric gross written premium reaching USD 5
billion, with expectations that this will grow by up to 9% year on
year.
Parametric insurance products may also be specifically
attractive in the Australian market due to the nature of payments
under these policies, which are generally structured as pre-agreed
sums or calculated based on an index but informed by objective and
measurable external data such as the speed of cyclone or hurricane
winds. As the criteria is objective and measurable, these products
allow insurers to service remote locations and increase speed of
claims payments compared to traditional insurance products in which
the loss would have to be proved by the policyholder.
