Parametric Insurance Advisory

Partnering with clients to advance their parametric insurance ambitions and in the process making the world more resilient

Understanding parametrics

Parametric insurance is quickly becoming a popular alternative to traditional insurance policies. Unlike traditional policies that require detailed assessments of losses, parametric insurance works by using predetermined, objective markers to determine payouts in the event of a specific triggering event, such as a natural disaster or other defined risk.

Parametric insurance can provide quick, transparent and customisable coverage for specific risks and exposures, allowing businesses and organisations to better manage their financial risk and protect their assets. It can cover previously difficult-to-insure risks and/or new risks that are currently uninsurable. In this process, it can fulfil its wide-ranging potential and, alongside traditional insurance and other novel forms of risk transfer, play a key part in closing the protection gap and make society more resilient.

Our parametric advisory offering

Our client discussions with a diverse range of carriers across the (re)insurance market provide multiple examples of how clients are looking to enter the parametric insurance market or enhance their existing capabilities.

PwC is uniquely positioned to provide access to parametric product experts as well as teams with climate resilience and deep industry sector insights – both from a (re)insurance perspective as well as cross sector expertise sourced from the broader PwC network (e.g. energy, agriculture, retail).

PwC offers the below listed end-to-end parametrics proposition depending on whether you are a corporate/captive or (re)insurer.

Our services

Risk Consultancy

A comprehensive assessment of your business risks and identification of which risks would be best suited for a parametric solution.

Structuring the risk transfer options

Structuring parametric solutions, including selection of effective indices, and exposure analysis to effectively transfer the risk.

Calculation of basis risk

Comparison of cost of risk transfer options, including estimation of payout and cost deltas between the parametric solution and expected loss.

Support in selecting appropriate risk transfer partner

Support in identifying an appropriate parametric solution partner to take on risk and advise during the e2e risk transfer process.

Tax advisory

Offering tax advisory support with regard to the treatment of parametric products .

Legal advisory

Specialist review and input on policy wordings to ensure contracted coverage meets risk transfer criteria.

Accounting advisory

Technical accounting advice on the impact of insurance policy on financial statements.

Market assessment and strategy

Providing market insights and collateral to support expansion activities, including go-to-market and product launch initiatives. In the context of parametrics, this can include assessing the types of risk.

Data modelling

Modeling different risk events to measure historical and projected losses, thus forming the basis on which to design and structure a parametric product.

Design and structuring products

Analysis of historical data and public indices to develop robust parametric triggers, including defining the appropriate pricing, limits, terms, etc for the specific risk to be covered.

Reserving and portfolio analysis

Identifying an appropriate reserving policy that addresses the risks covered.

Tax, risk, legal, regulatory and accounting services

Offering tax, risk, legal, regulatory and accounting advice in the design of a parametric policy.

Sector-specific insights

End-to-end advisory expertise across a diverse range of industry verticals.

Operating model design and delivery

Advising on how to set up the parametric insurance programme from an operational perspective (underwriting, claims, reserving).

Your benefits

Speedy payment of claims

As parametric solutions are based on an index rather than physical loss, claims are processed without any need for a lengthy claims investigation. This allows for claims to be paid very quickly (5–30 days on average). This also makes them particularly useful to manage earnings volatility.

Claims certainty and transparency

When disaster strikes, the insured needs liquidity; a parametric solution removes all subjectivity as the claims pay-out is set on the pre-agreed index measurement being reached, rather than a loss. This means that no claims investigation or loss adjustment is needed, just confirmation that the index or trigger occurred and the payout is then made.

Bespoke solutions

Policy exclusions, limits and sub-limits can leave losses or assets uncovered. With parametrics, a structured, tailor-made solution can be put in place that will accurately reflect an insured company’s exposure. This would include customising the trigger or index, the locations, the payout amount and the timeframe, which can span multiple years.

Offers immediate payout for emergency cash relief.
Acts as a complement to traditional insurance, not as a substitute.
Makes sense when traditional insurance is not accessible or affordable.

With our experienced global parametric advisory team, we help our (re)insurance clients grow their commercial book by offering robust parametric solutions. We bring capabilities in designing and building their e2e parametric programme while partnering with corporates to identify and manage their risks. By taking advantage of our parametric solutions, our corporate clients can benefit from a more effective risk transfer programme.

Alexander ViergutzGlobal Head of Parametrics Insurance Advisory, PwC Switzerland

Frequently asked questions or client cases

Parametric insurance is a type of insurance that pays out a pre-agreed amount of money in the event of a specific, measurable event occurring. Unlike traditional insurance policies, which require a loss to be verified before any payout is made, parametric insurance pays out automatically once certain predetermined conditions are met.

Parametric insurance can be used to cover a wide range of events, from natural disasters such as earthquakes and hurricanes to non-physical events such as business interruption due to a cyber-attack. Essentially, any measurable event can be covered by a parametric insurance policy.

Traditional insurance policies require a loss to occur before any payout is made, and the payout is typically based on the value of the loss. Parametric insurance, on the other hand, pays out a predetermined amount based on the occurrence of a specific event, regardless of the actual value of the loss.

Parametric insurance can be advantageous in situations where traditional insurance may not be feasible or cost-effective. Because parametric insurance payouts are based on objective, measurable events, the claims process can be faster and simpler than with traditional insurance. Additionally, parametric insurance can provide coverage for risks that may be difficult to insure in other ways.

One potential disadvantage of parametric insurance is that the payout may not always align with the actual losses incurred (known as ‘basis risk’). For example, if a business experiences a loss due to a weather event, the payout from a parametric insurance policy may not align with the actual cost of the damage. Additionally, parametric insurance policies may be more expensive than traditional insurance in some cases.

Parametric insurance may not be suitable for all types of risks. Events that are difficult to measure or predict might not be eligible for parametric insurance coverage. Additionally, the payouts from a parametric insurance policy may not fully cover all losses incurred by the insured, which could be a drawback for some businesses and individuals.

Generally speaking, parametric solutions can be executed as an insurance contract or as a derivative, depending on the preference and needs of the client. It always depends on a country’s regulatory and legal framework, but usually the main difference is that an insurance contract requires an ‘insurable interest’ and a ‘proof of loss’. If executed as an insurance contract, the policy follows the same accounting rules and principles as any other insurance contract.

Parametric solutions can be structured to cover various types of events beyond just natural catastrophes (Nat Cat). While parametric solutions are particularly well-suited for Nat Cat risks due to the ability to quickly and objectively measure the occurrence and severity of a triggering event, they can also be designed to cover other risks that have measurable indices or triggers.

For example, parametric solutions can be structured to cover events such as political risk events, commodity price fluctuations, energy price volatility and other types of risks that have well-defined triggers or indices that are observable. In all cases, the key is to accurately identify a trigger that will appropriately reflect the underlying value of the loss that needs to be compensated.

By leveraging parametric solutions to cover non-Nat Cat events, businesses and insurance companies can gain access to alternative risk transfer strategies that provide faster payouts and more predictable coverage than traditional insurance products.

Contact us

Contact us

Alexander Viergutz

Director, Global Head of Parametrics Insurance Advisory & Senior Client Executive, PwC Switzerland

+41 77 814 42 28


Jörg Thews

Partner, Swiss Insurance Leader, Zurich , PwC Switzerland

+41 58 792 26 35