Global Parametric Insurance Market 2024–2033

Reports Description

As per the current market research conducted by the CMI Team, the global Parametric Insurance Market is expected to record a CAGR of 12.1% from 2023 to 2032. In 2022, the market size is projected to reach a valuation of USD 15.2 billion. By 2032, the valuation is anticipated to reach USD 35.6 billion.

Top 10 Countries’ Insurance Coverage Rate

Source: According to CMI Market Research Team Analysis

The parametric insurance market refers to the sector that offers coverage based on predetermined triggers or events rather than traditional claims assessment. It provides policyholders with predetermined payouts in the event of specific triggers being met, such as natural disasters or market fluctuations.

Parametric insurance operates on a data-driven model, utilizing advanced analytics and technology for risk assessment, trigger formulation, and claim settlements. It offers faster and more transparent claim payouts, enabling businesses and individuals to manage specific risks efficiently.

Current trends in the parametric insurance market include the expansion of coverage options to address emerging risks like cyber threats, the integration of parametric insurance with other risk management tools for comprehensive protection, the growing demand for customizable coverage solutions, and the increasing use of advanced data analytics and technology to refine trigger design and enhance risk assessment capabilities.

Parametric Insurance Market – Significant Growth Factors

The Parametric Insurance Market presents significant growth opportunities due to several factors:

• Increasing Adoption of Parametric Solutions: There is a growing trend of businesses and individuals adopting parametric insurance solutions to manage specific risks. The recognition of the benefits of quick payouts, customization options, and transparent coverage has increased interest in parametric insurance across various industries.

• Integration of Parametric Insurance with Technology: The integration of parametric insurance with advanced technology is a significant trend in the market. Insurers leverage data analytics, artificial intelligence, and automation to enhance risk assessment, trigger design, and claims management processes. This integration improves the efficiency and accuracy of parametric insurance products.

• Expansion of Coverage for Non-Traditional Risks: Parametric insurance is evolving to cover non-traditional risks such as cyber threats, pandemics, and supply chain disruptions. The market is witnessing a trend where insurers are developing parametric solutions to address these emerging risks, providing tailored coverage that goes beyond traditional property and casualty insurance.

• Emerging Market Penetration: The parametric insurance market offers opportunities for expansion into emerging markets. Developing countries often face unique risks such as extreme weather events, agricultural vulnerabilities, and infrastructure challenges. Parametric insurance can provide a valuable risk management tool in these markets, enabling greater financial protection and resilience.

• Collaboration with Insurtech Startups: Insurtech startups are driving innovation in the insurance industry, and parametric insurance presents opportunities for collaboration. Insurers can partner with startups to leverage their technology and data analytics capabilities, accelerating the development of parametric insurance solutions and reaching new customer segments.

• Cross-Sector Applications: Parametric insurance has the potential to be applied across multiple sectors beyond its traditional use cases. Industries such as travel, sports, entertainment, and energy can benefit from customized parametric coverage to mitigate specific risks. Exploring and expanding into new sectors presents opportunities for insurers to diversify their offerings and tap into previously untapped markets.

Parametric Insurance Market – Mergers and Acquisitions

The Parametric Insurance Market has seen several mergers and acquisitions in recent years, with companies seeking to expand their market presence and leverage synergies to improve their product offerings and profitability. Some notable examples of mergers and acquisitions in the Parametric Insurance Market include:

• Marriott International and Alibaba Group formed a partnership in 2018 to enhance the digital experience for Chinese travellers attending MICE events. The collaboration focused on leveraging Alibaba’s digital platforms to provide personalized services and seamless booking processes for event attendees.

• Hilton Worldwide and American Express Global Business Travel announced a partnership in 2019 to offer exclusive benefits and experiences to corporate clients and their attendees. The collaboration aimed to streamline event planning, enhance attendee experiences, and provide cost-saving solutions for corporate meetings and events.

• Cvent, a leading event management technology company, partnered with Uber for Business in 2020 to integrate transportation solutions into event planning and management processes. The partnership enabled event organizers to offer convenient transportation options to attendees and streamline the logistics of getting to and from event venues.

• PSAV, a global event production company, acquired Encore Event Technologies in 2018. This acquisition allowed PSAV to expand its capabilities in audiovisual services, event technology solutions, and staging services, strengthening its position as a leading provider of event production and technology solutions.

• Clarion Events, a global event organizer, acquired PennWell Corporation in 2018. The acquisition expanded Clarion Events’ portfolio of events and publications, particularly in the energy sector, and enabled them to offer a wider range of industry-specific exhibitions and conferences.

• UBM, a leading global exhibition organizer, was acquired by Informa PLC in 2018. The merger created a major player in the Parametric Insurance Market, combining UBM’s strong presence in the exhibitions sector with Informa’s expertise in conferences and events, resulting in a comprehensive portfolio of business-to-business events across various industries.

These mergers and acquisitions have helped companies expand their product offerings, improve their market presence, and capitalize on growth opportunities in the Parametric Insurance Market. The trend is expected to continue as companies seek a competitive edge in the market.

COMPARATIVE ANALYSIS OF THE RELATED MARKET

Parametric Insurance Market – Significant Threats

The Parametric Insurance Market faces several significant threats that could impact its growth and profitability in the future. Some of these threats include:

• Inaccurate Trigger Design: One of the critical threats is the potential for inaccurate trigger design. If triggers are not carefully formulated or fail to capture the true impact of a specific event, it can lead to disputes and dissatisfaction among policyholders. Inaccurate triggers may result in underpayment or overpayment, affecting the credibility and trust in parametric insurance products.

• Lack of Standardization: The absence of standardized practices and definitions across the parametric insurance market poses a threat. Varying methodologies for trigger design, data sources, and claim settlements can create confusion and inconsistency. The lack of standardization may hinder market growth and make it more challenging for policyholders to compare and evaluate different parametric insurance offerings.

• Limited Data Availability: Parametric insurance heavily relies on data to accurately assess risks and determine trigger parameters. However, limited or insufficient data availability can pose a threat to the market. In some regions or industries, data may be scarce or of low quality, making it challenging to develop reliable parametric insurance products. Insufficient data can also result in inaccurate pricing and potentially impact the profitability of insurers.

• Lack of Public Awareness and Understanding: A lack of public awareness and understanding about parametric insurance poses a threat to its wider adoption. Many individuals and businesses may not be familiar with the concept of parametric insurance or its benefits compared to traditional coverage. Insufficient knowledge about how parametric insurance works and its relevance to specific risks can hinder market growth and limit its potential impact in providing effective risk transfer solutions.

Report Scope

Category-Wise Insights

By Type:

• Natural Catastrophes Insurance: Natural Catastrophes Insurance offers protection against the financial consequences of natural disasters like hurricanes, earthquakes, floods, and wildfires. It assists individuals and businesses in recovering from the economic impact of these events. It helps individuals and businesses recover from the economic consequences of these calamities. Recent trends in the market include increased demand due to climate change, improved risk modelling, and the development of parametric insurance products.

• Specialty Insurance: Specialty Insurance refers to insurance coverage for unique and non-traditional risks that are not typically covered by standard insurance policies. It includes various types of niche coverage such as aviation, cyber liability, fine art, and professional indemnity. The specialty insurance market has witnessed growth due to the increasing complexity of risks in the modern world and the need for specialized coverage.

• Others: The “Others” segment in the insurance industry encompasses a wide range of specialized insurance products that do not fall into the natural catastrophes or specialty insurance categories. This can include unique offerings like event cancellation insurance, terrorism insurance, political risk insurance, and pandemic-related coverage. The market for these insurance products is influenced by emerging risks, global events, and the evolving needs of businesses and individuals seeking protection against specific uncertainties.

By Industry Vertical

• Agriculture: Parametric insurance in agriculture provides coverage based on predefined triggers like weather conditions or crop yield. It helps farmers mitigate risks related to unpredictable weather events, pests, or diseases. The market is witnessing increased adoption due to the growing need for financial protection in the face of climate change and volatile crop yields.

• Aerospace & Défense: Parametric insurance in the aerospace and defence industry offers coverage based on predetermined parameters such as flight delays, cancellations, or damage to equipment. It enables companies to manage risks associated with operational disruptions and ensures quick compensation. The market is evolving to address the specific needs and risks of the industry.

• Construction: Parametric insurance in the construction industry offers coverage for events like project delays, extreme weather, or cost overruns. It provides contractors and project owners with financial protection and helps manage uncertainties in construction projects. The market is growing as construction firms recognize the benefits of parametric coverage in mitigating project risks.

• Energy & Utilities: Parametric insurance in the energy and utilities sector provides coverage for risks such as power generation interruptions, price fluctuations, or weather-related damages. It helps energy companies manage risks and ensure uninterrupted operations. The market is witnessing increased adoption as the energy sector faces growing volatility and climate-related risks.

• Manufacturing: Parametric insurance in the manufacturing industry offers coverage based on specific triggers like equipment breakdowns, supply chain disruptions, or production losses. It helps manufacturers mitigate financial losses and maintain operational continuity. The market is expanding as manufacturers recognize the value of parametric solutions in managing various risks.

• Mining: Parametric insurance in the mining sector provides coverage for risks such as commodity price fluctuations, natural disasters, or operational interruptions. It allows mining companies to mitigate financial losses and maintain stability in a volatile industry. The market is expanding as mining companies seek innovative risk management solutions.

• Others: Parametric insurance is also gaining traction in other industries, including transportation, retail, hospitality, and logistics. It provides coverage for specific risks such as shipment delays, revenue shortfalls, or property damage. The market for parametric insurance in these sectors is evolving to address industry-specific needs and mitigate risks effectively.

Parametric Insurance Market – Regional Analysis

The Parametric Insurance Market is segmented into various regions, including North America, Europe, Asia-Pacific, and LAMEA. Here is a brief overview of each region:

• North America: In North America, the parametric insurance market is seeing a rise in the use of technology and data analytics to better understand and price risks. There is also a growing emphasis on parametric insurance products that specifically cover risks related to climate events like hurricanes and wildfires, given the region’s susceptibility to natural disasters. Some of the dominating market players in North America’s parametric insurance market include Swiss Re, Munich Re, AXA XL, and The Hartford. These companies have a strong presence and offer a wide range of parametric insurance solutions tailored to various industries and risks.

• Europe: In Europe, the trend in the parametric insurance market is the integration of parametric solutions with traditional insurance products, providing comprehensive coverage to businesses. There is also a significant focus on parametric insurance for agriculture, as European countries have a substantial agricultural sector and face risks related to weather fluctuations and crop yields. Key market players in Europe’s parametric insurance market include Zurich Insurance Group, Allianz, SCOR, and Swiss Re. These companies have extensive experience in the insurance industry and offer innovative parametric insurance solutions for different sectors, including agriculture, energy, and construction.

• Asia-Pacific: Some of the dominating market players in the Asia-Pacific parametric insurance market include Ping An Insurance, AIA Group Limited, Mitsui Sumitomo Insurance Group, and Samsung Fire & Marine Insurance. In the Asia-Pacific region, there is a rising demand for parametric insurance in emerging economies within the region. This demand stems from the desire to support the growth of various industries and enhance risk management practices.

• LAMEA (Latin America, Middle East, and Africa): In the LAMEA region, the trend in the parametric insurance market is the increasing awareness and adoption of parametric solutions to address risks related to natural disasters, political instability, and commodity price fluctuations. There is also a growing focus on parametric insurance for energy and infrastructure projects in the region. Key market players in the LAMEA parametric insurance market include Munich Re, Swiss Re, AXA XL, and Mapfre. These companies have a strong presence in the region and offer tailored parametric insurance solutions to mitigate risks across various industries, including energy, construction, and mining.

Competitive Landscape – Parametric Insurance Market

The Parametric Insurance Market is highly competitive, with a large number of manufacturers and retailers operating globally. Some of the key players in the market include:

• Swiss Re Group
• Munich Re Group
• AXA Group
• Allianz SE
• Lloyd’s of London
• Swiss Life Holding AG
• Hannover Re Group
• QBE Insurance Group Limited
• Zurich Insurance Group Ltd.
• Sompo Holdings Inc.
• Others

These companies operate in the market through various strategies such as product innovation, mergers and acquisitions, and partnerships. For example, In 2021, notable partnerships in the parametric insurance market included Swiss Re collaborating with B3i to develop blockchain-based solutions, Munich Re partnering with Wejo for usage-based insurance, and Generali joining forces with Descartes Underwriting to enhance parametric insurance offerings for climate-related risks.

In the parametric insurance market, new players are actively adopting innovation and development strategies to enter the market. These emerging companies are leveraging technological advancements, data analytics, and novel risk assessment methods to offer unique parametric insurance solutions.

By introducing innovative products and services, these new players are challenging the traditional market dynamics and contributing to the overall growth and competitiveness of the industry. At the same time, several key players have established a dominant position in the parametric insurance market. Companies such as Swiss Re, Munich Re, AXA XL, and Zurich Insurance Group have extensive experience, a wide range of offerings, and a strong market presence.

They leverage their expertise and customer base to provide comprehensive parametric insurance solutions and maintain their dominance in the market. These key players often collaborate with industry stakeholders and actively participate in market development initiatives to further strengthen their position.

The Parametric Insurance Market is segmented as follows:

By Type

• Natural Catastrophes Insurance
• Specialty Insurance
• Others

By Industry Vertical

• Agriculture
• Aerospace & Defence
• Mining
• Construction
• Energy & Utilities
• Manufacturing
• Others

By Region

North America

• U.S.
• Canada
• Mexico
• Rest of North America

Europe

• Germany
• France
• U.K.
• Italy
• Spain
• Rest of Europe

Asia Pacific

• China
• Japan
• India
• New Zealand
• Australia
• South Korea
• Rest of Asia Pacific

The Middle East & Africa

• Saudi Arabia
• UAE
• Egypt
• Kuwait
• South Africa
• Rest of the Middle East & Africa

Latin America

• Brazil
• Argentina
• Rest of Latin America