Start Network [Consortium of British Humanitarian Agencies] [to 17 January 2015]
http://www.start-network.org/news-blog/#.U9U_O7FR98E

Start to trial new Parametric Insurance model with HIF funding
January 14, 2015
Posted by Tegan Rogers
The Start Network and GlobalAgRisk will work together to develop a prototype for a Parametric Insurance product with funding from the Humanitarian Innovation Fund. The intention is to design a drought insurance product which will enable automatic pay-outs for early response to major food crises by civil society actors.

Despite widespread advances in early warning systems for major droughts, NGOs often struggle to put in place preventative measures because of their restrictive funding model. This funding model is dependent on media headlines generating public interest before major donors are mobilised to support a response. At this stage many lives have already been lost, livelihoods destroyed and hard-won development gains undermined. Early, preventative action in such situations has been found to be far more effective.

Parametric insurance is similar to normal insurance, in that in return for a yearly premium (calculated by expected frequency and severity of an event) a pay-out is received if the event takes place. However a key difference is that instead of making payments on the basis of losses measured after an event, it makes the payments automatically based on pre-agreed triggers. This means that there is no arguing about the amount of damage, and that the pay-outs are predictable. Better still, the triggers can be predictive, so you can receive pay-outs before an event actually occurs, in what is known as an ex-ante payment…