What We Offer At A Glance
covered for Cyclone, Flood, Earthquake, Wildfire, Severe Convective Storms (SCS)
of A+ rated capacity per cover
designed by 150+ experts to tailor coverage to cedent’s needs
offices in 10 countries
insurance companies trust us
reinsurance brokers work with us
Why Parametric Matters for Insurance Companies
Parametric reinsurance triggers payouts based on objective, predefined physical measurements—rather than traditional loss adjustment—allowing insurers to access fast and transparent recovery after catastrophic events.
Insurers increasingly use parametric cover to design tailored natural perils protection and address protection gaps across their conventional reinsurance tower. It helps stabilize earnings, reinforces balance-sheet strength, and provides support on perils and scenarios poorly covered by conventional reinsurance towers. It also supplies immediate capital for reinstatement premiums following catastrophic events.
In practice, parametric cover acts as a flexible, responsive complement that enhances the overall effectiveness of any conventional reinsurance structure and is an essential component of the reinsurance toolkit.
Built Around Two Core Insurer Objectives
✓ Earnings Protection:
Stabilize financial results by providing frequency protection against high-volume, low-severity events through portfolio aggregate covers.
✓ Capital Efficiency:
Reduce exposure on remote layers of the tower, lowering an insurer’s large losses and enhancing solvency capital ratios via balance sheet protection.
Seamless Integration with the Cedent’s View of Risk
✓ Fully Tailored, Never One-Size-Fits-All
Working closely with each cedant’s reinsurance broker, Descartes designs parametric structures around their specific portfolio characteristics and internal risk view. This ensures a close alignment between the parametric payout and the insurer’s actual loss experience. Unlike rigid industry-index products such as ILWs, our solutions are fully flexible and purpose-built for each insurer.
✓ Modelled-Loss Options for Perfect Alignment
To ensure the structure mirrors the cedent’s own view of risk, Descartes develops the optimal parametric proxy for each portfolio. Modelled-loss solutions can be structured using Descartes’ proprietary models, or the cedent’s preferred vendor models to guarantee seamless integration with internal risk frameworks and risk processes.
✓ Transparent Back-Testing and Evidence-Based Design
We analyze historical portfolio data and loss history to show exactly how the parametric structure would have responded to past events. This quantitative back-testing provides high transparency on expected performance and reinforces confidence in the coverage design.
Fast Payouts and Immediate Liquidity
✓ Objective Triggers, No Loss Adjustments
Parametric reinsurance pays out when pre-defined, objectively measured physical indices are exceeded. Because recoveries are not tied to incurred loss calculations, there is no need for lengthy claims adjustment.
✓ Weeks, Not Months or Years
Traditional treaties — and index instruments such as Industry Loss Warranties — often require months or even years to finalize loss computations. Descartes’ parametric structures deliver contractual certainty and payouts within weeks of the triggering event or the end of the policy period.
✓ Liquidity When Insurers Need It Most
Fast recoveries provide immediate cash flow for critical financial needs, including loss fund financing, funding of reinstatement premiums, and maintaining dividend policies after a major event. This accelerated liquidity strengthens financial resilience and supports faster recovery following catastrophic losses.
How Descartes Parametric Reinsurance Works
Assess
Each cedant’s risk appetite and portfolio risk profile are closely assessed with the support of their broker to determine the most appropriate structure, limit, and triggers.
Customize
Bespoke layers of reinsurance structured to optimize the ceding insurers’ existing reinsurance tower.
Monitor
Upon inception of the reinsurance policy, we monitor the globe for the occurrence of reinsured events to determine when a qualifying loss has occurred.
Payout
Reinsured clients receive recoveries within weeks of first notice of loss, accelerating financial recovery cutting red tape for quick full and final settlement.
A Wide Range of Perils Covered
Our parametric reinsurance policies can cover one or several natural perils.
Tropical Cyclone
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Case study: Typhoon Reinsurance for Taiwan
Earthquake
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Severe Convective Storms
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Flood
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Wildfire
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Multi-peril crop reinsurance
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FAQ
What types of insurance portfolios can be covered?
We can structure parametric solutions for all natural peril-exposed portfolios, including home, motor, commercial, specialty, and aggregated multi-line books.
What is the geographical coverage?
Coverage is available worldwide, across regions exposed to natural catastrophe perils.
What information do insurers need to provide?
We require current portfolio exposure data, and—if available—historical exposures along with past loss history to calibrate and back-test the structure.
Can the parametric structure integrate with our existing vendor models?
Yes. We can build the coverage using your preferred vendor models or Descartes’ proprietary models for seamless alignment.
What is basis risk, and how do modern parametric treaties reduce it?
Basis risk is the possibility that an insurance payout does not correspond to the insured’s actual loss. In parametric covers, it arises when the trigger or index (e.g., rainfall, wind speed, earthquake intensity) does not align with the real impact, leading to payments that are higher or lower than the loss, or no payment despite losses.
To mitigate this, modern parametric reinsurance is engineered to move away from "binary" triggers that pay out all or nothing based on a single threshold. Instead, these products typically utilize incremental payout structures where the indemnity scales gradually as an event intensifies or moves closer to a predefined location (e.g., via distance to track, central pressure, or ground shaking intensity). Furthermore, parametric products are particularly effective for reinsured portfolios covering diverse geographic zones. By aligning trigger levels with dispersed insured values, the structure reduces payout volatility and eliminates "cliff effects", where a minor fluctuation in a parameter would otherwise flip a payout from 100% to 0%, ensuring the recovery more closely tracks the actual loss patterns across the entire portfolio.
To calibrate these structures, our data scientists, climate specialists, and underwriters analyze extensive datasets and apply advanced hazard modelling, large-scale simulations, and rigorous calibration to ensure our parametric proxies capture the most significant loss-driving events. This strengthens the correlation between the trigger and real economic impact, and can often result in lower basis risk than conventional indemnity covers, which may still be affected by exclusions, deductibles, and sub-limits.
Contact Us
Whether you're quoting a complex risk, looking to break into new markets, or just curious about parametric insurance, our team is here to help you win. Reach out and we will get back to you within 48 hours.
