Parametric Insurance: A Newcomer But No Longer A Niche Product

Parametric insurance has become increasingly important due to extreme weather situations, the COVID-19 pandemic or the rise of cloud-based applications. Since the insurance industry has greatly expanded its know-how in the field of data analytics, data reporting and modelling techniques, parametric insurance is no longer a niche product.

Currently, there is no legal definition or relevant regulations for parametric insurance in Austria. There is also no legal classification of the product under a specific insurance class. This is hardly surprising, as the financial market authority (FMA) did not publish a description of parametric insurance until 2019. But it did come up in a 2013 European Commission green paper on "Insurance against natural and man-made disasters" that described a parametric index-based insurance system as one in which compensation is paid for a loss caused by extreme weather events regardless of the actual amount when a given weather index