WTW lists 5 benefits of parametric insurance in energy sector

Regular payouts often take 15 to 30 days, but parametric can expedite this long-wait.

In 2023, global economic losses exceeded $350b, highlighting a protection gap that traditional insurance struggles to fully address. 

Whilst conventional policies cover material damage, they often fall short in mitigating losses from non-damage business interruptions, particularly in industries dependent on natural resources like wind, rainfall, or solar irradiation. These interruptions can severely impact operations and revenue.

Parametric insurance solutions are designed to fill this gap, especially in scenarios where traditional coverage is lacking. WTW tallies five ways it can reduce energy transition risk volatility: revenue protection, immediate and flexible liquidity, incentives, capital flow, and resilience.

This supports investment in growth initiatives, ensuring companies can protect revenue tied to natural resources like wind and water. 

With payouts typically settled within 15 to 30 days, parametric insurance offers immediate liquidity, allowing companies to respond swiftly to disruptions and invest in necessary repairs or technology upgrades.