Parametric insurance (also called index-based insurance) is a non-traditional insurance product that offers pre-specified payouts based on a trigger event. It basically covers the probability of a loss-causing event happening instead of indemnifying the actual loss incurred from the event.
It is particularly well-suited for natural catastrophes, but it can also be applied to other emerging risks where data is available and can be analysed. Such emerging risk areas may include those affecting the volatile informal sector in Kenya.
