Parametric Insurance: General Market Trends and Perspectives for the African Insurance Sector

The development community has strongly supported several pilot projects with the objective of assessing the feasibility of implementing risk transfer solutions for developing countries based on these innovations. The contribution from this community has been remarkable in proving the concept and has provided invaluable case studies. Given the success achieved so far, it is now appropriate to plan the development of scalable and sustainable local parametric insurance markets in developing countries.

Within the international reinsurance market, PartnerRe has pioneered initiatives to engage in local market development efforts with financial institutions in developing countries for implementing parametric weather and parametric catastrophe products. PartnerRe has supported the design and implementation of programmes in developing countries at both macro and micro levels.

Based on Partner Re’s experience, this article aims to provide an overview of the current market development efforts and to set out what are considered to be the key constraints that impede the sustainable development of private parametric insurance markets in developing countries. The article recommends an approach that facilitates the participation of local financial institutions in the development of sustainable risk transfer markets.