FRP’s Senior Vice President, Mark Pennebaker, provides insight on a compelling alternative to indemnity-based insurance.

The landscape of commercial property insurance is undergoing a notable evolution, marked by a shift toward non-traditional solutions. One innovative approach is parametric insurance, also known as index-based insurance. Unlike traditional indemnity-based insurance, which assesses losses after they occur, parametric insurance operates on predefined parameters such as wind speeds, earthquake magnitudes or rainfall levels. When a predefined event occurs, policyholders receive a predetermined payout.

Looking ahead, as technology advances and data analytics become more sophisticated, parametric insurance will likely become more precise, reducing basic risks and refining its ability to provide prompt, tailored coverage. However, it’s still important for policyholders to understand its nuances and limitations.

Read more on Mark’s experienced perspective inside ALM|PropertyCasualty360’s December 28, 2023, article, Parametric Insurance is Reshaping Commercial Property Coverage.