What Is The Most Popular Parametric Solution? Cat In A Box Explained.
White Paper Summary
For those of you who are new to the concept this may all sound very complex (or just plain strange if you happened to type the search term “Cat in the Box” into google images), however as you’ll see, in practice it is quite straightforward.
Firstly, a quick recap – what is parametric insurance and how does it work?
Simply, parametric insurance is based on a pre-agreed event occurring and a pre-agreed payout. It relies on a measurement of an event or index – such as temperature, wind speed, or precipitation – and unlike traditional indemnity insurance, it is independent from a client’s underlying asset. As such it does not necessarily require physical damage to the underlying asset and allows for a quick formulaic payout once pre-defined parameters are met or exceeded.
Customizable to the individual client, parametric insurance can cover losses including (though not limited to) building damage, loss of profits or revenue, non-damage business interruption, increase costs such as expediting or labor costs, loss of land value, loss of attraction, advertising costs and more.
How a parametric solution is structured however, is central to how it works in the real world.
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