In Part One of this series, we took you on a guided tour through the landscape of parametric solutions. We presented their advantages, such as rapid execution and payment, as well as the obstacles they face, including index adequacy, carrier appetite, data interpretation, and the demand for innovation. Against the backdrop of climate change, we showed how parametric covers can respond to extreme risks and the environmental transition. We considered the complexity involved in selecting data in our increasingly digital world, and also looked at some of the history behind this type of cover. Finally, we wrapped up our tour with a focus on agriculture and on developments in the microfinance and environmental sectors.
In Part Two, we will be focusing on concrete examples, using three case studies typical of parametric cover. Our aim is to actually design appropriate parametric risk transfer solutions, starting with the analysis of the underlying risk. We will cover the use of data, show how models can be created based on historical data or a stochastic event set, and demonstrate how those models can be challenged by taking an expert point of view on board. Finally, we will look at cost structure along with contractual conditions.