Global Parametrics to bring insurance to vulnerable communities in developing countries
A summary of an article first published on www.artemis.bm.
The imminent launch of Global Parametrics, a parametric risk transfer provider backed by a third-party capitalised risk fund, is interesting news in the world of disaster risk transfer and financing for the developing world and development communities.
Global Parametrics will target selling only parametric risk transfer and index insurance coverage to organisations which are largely unprotected today, as it aims to focus its products on areas that can help to reduce the protection gap and help to address under-insurance of poor and vulnerable people in developing countries.
The mandate of Global Parametrics will be to offer parametric protection, backed by strong science and risk modelling, selling protection to the likes of non-governmental organisations (NGOs), development banks, microfinance providers and even municipalities, while sharing the risk with third-party investors via an investment fund structure known as the Natural Disaster Fund (NDF).
At the World Humanitarian Summit in Istanbul on May 23, Baroness Verma, the UK’s Parliamentary Under Secretary of State for International Development, revealed the initiative saying that the UK, alongside Germany and partners, was planning “to develop a transformational parametric insurance venture, Global Parametrics, and a Natural Disaster Fund.”
The developing world sees significant inward capital flows and investment, from organisations working in the region, those providing financing, humanitarian assistance, infrastructure and other investments. A large amount of this capital and often the poor, and vulnerable beneficiaries are at risk from severe weather or natural catastrophe events, but do not have any protection or financing that specifically targets these exposures.
Global Parametrics will offer derivative risk transfer products to enable these organisations to better protect their financing and operations against the impacts of catastrophic weather or natural disaster events.
Using parametric triggers, based on weather indices or natural disaster variables, the coverage provided by Global Parametrics will be quick to respond and payout when disaster strikes, which is vital in developing markets and for the development community operating there to assist the local population.
The Chief Sponsor of Global Parametrics is Jerry Skees of GlobalAgRisk and formerly the University of Kentucky, an experienced science and modelling focused weather, climate and disaster risk professional who has worked on agricultural insurance, weather-index insurance and derivative type programs for over three decades.
Global Parametrics has been funded for launch by the German government’s Climate Insurance Fund. The UK government’s Department for International Development has also supported the creation of this venture and is committed to its future success.