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Best’s News & Research Service - December 20, 2023 12:05 PM (EST)

AM Best Explores Risk Management and Loss Mitigation Opportunities Offered by Parametric Solutions

  • December 20, 2023 12:05 PM (EST)
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London //BestWire// - The increased frequency of weather events, like severe storms and flooding, pose a real threat to communities which may struggle to find sufficient protection through traditional insurance markets. As insurers and their customers consider solutions to this problem and other emerging risks, AM Best expects parametric products to represent a growing share of the insurance world.

A new Best’s Special Report, “Parametric Solutions Offer Risk Management and Loss Mitigation Opportunities, explores ways that parametric insurance products can supply insureds with more objectivity, simplicity, transparency, and certainty of claims settlement, and can supplement traditional indemnity insurance products.

On the other hand, parametric products are not without drawbacks and challenges. The report also examines the basis risk – the risk of the pay-out not equating to the actual losses or assumed costs – which is present for insureds in parametric products.

For insurers, the costs of underwriting, administration, and claims processing of parametric products tend to be lower than traditional indemnity products. Furthermore, parametric solutions may also support insurers, particularly property catastrophe writers, in demonstrating their commitment to the United Nation’s Sustainable Development Goals through the support of strong biodiversity in risk-prone areas.

To access a complimentary copy of this special report, please visit .

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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