Parametric solutions
The parametric market has grown significantly, reaching USD 19.2bn in 2025, with strong adoption across many sectors. Growth was driven by climate-related disasters, demand for faster payouts, and advances in Technology, AI, and satellite data. North America leads with a 36% share, while Asia-Pacific is the fastest-growing region due to climate vulnerability and government-backed schemes.
Though the parametric market has a much smoother market cycle, it is currently a soft market favouring buyers, with ample capacity, competitive pricing, and broad coverage availability. Traditional property markets have softened, and many companies are reinvesting premium savings into parametric solutions to fill coverage gaps.
Rates are determined using bespoke risk and catastrophe modelling and are highly subjective to the type of risk, the geography, and overall exposure.
Claims frequency is rising due to climate volatility (e.g., floods and droughts). Claims severity is high for catastrophic triggers, but payouts are capped and predefined, reducing uncertainty.
Major climate events—wildfires in California, floods in Asia and Europe, and severe convective storms in the US (>USD 50bn losses in 2024)—have accelerated demand for parametric solutions. More recently, the Category 5 Hurricane Melissa is expected to have caused approximately USD 3bn in insured losses.
Parametric solutions provide the benefit of speedy settlements (often within days) and reduce operational burden and litigation risk compared to traditional policies.
When considering terms, insurers are focussing on the following:
Trigger Accuracy: correlation between index and actual loss
Basis Risk Mitigation: multi-trigger structures and geographic granularity
Data Quality: the reliability of third-party sources (Satellite, NOAA)
Event Modelling: AI-driven predictive analytics for NatCat and emerging risks
2026 outlook
We are expecting to see continued double digit growth (CAGR ~12%) in the parametric market. With expansion of offerings relating to cyber, supply chain and renewable energy risks. Multi-trigger and blended parametric-indemnity solutions are also gaining traction and should be considered at renewal.
There is an opportunity to increase limits, especially for secondary perils (wildfire, hail) and non-damage business interruption by utilising parametric solutions.
Ahead of renewal companies considering parametric solutions should:
- Validate trigger selection: ensure alignment with actual exposure
- Assess basis risk: understand payout scenarios vs. potential losses
- Explore parametric solutions: Consider how to integrate parametric with traditional cover
Getting the most from the market
The favourable market presents significant opportunities for companies looking to enhance their program using parametric solutions. To ensure optimal outcomes at renewal organisations should:
- Leverage Analytics: use historical and predictive data to negotiate better terms
- Engage Early: start renewal discussions well before peak season
- Consider ESG & Resilience Goals: ensure program aligns with sustainability strategies