Insurance TAMs

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Parametric Insurance - TAM

The total addressable market or the market size for parametric insurance, globally and regionally, was not available. However, 34.3% of business customers and 15.5% of individual customers express a high interest in parametric insurance. It is considered one of the key industry trends by several experts. Below, we collected relevant findings from the research and detailed our strategy.

Helpful Findings

Growing Interest in Parametric Insurance

  • According to Capgemini's World Insurance Report 2019, 34.3% of business customers and 15.5% of individual ones are very interested in parametric insurance.
  • The interest is fueled by the growing frequency of natural catastrophes. Between 2017 and 2019, insured losses from such events were $219 billion, the highest of all time.
  • As a result, 31% of business customers and 21% of individual ones believe that "disruptive environmental patterns will impact them significantly."
  • The growth in interest is also fueled by tech developments that increase the effectiveness of this type of insurance, including artificial intelligence, data science, and sensor technology.
  • Industry experts note that parametric insurance is growing in popularity. According to AXA Global, it is a major disruptor in the insurance market.
  • The company emphasizes that out of nine economic sectors, seven are exposed to weather-related events, even without factoring in climate change.
  • Also, Capgemini thinks that new business models such as on-demand or parametric insurance are one of the ten key trends in property and casualty insurance.
  • WNS believes that parametric insurance is one of the five leading trends impacting the insurance industry, attributing the growing popularity to tech advancements that allow for new applications.

Related Regional Insights

  • According to Swiss Re, in North America, 69.7% of earthquake loss is uninsured, as well as 40% of storm loss.
  • In Western Europe, 96.4% of earthquake loss is not insured, compared to 39.2% of storm loss.
  • In Latin America, 83.3% of earthquake loss and 82.4% of storm loss are uninsured.
  • In Asia, 88.8% of earthquake loss is not insured, as well as 80.3% of storm loss.
  • Countries that are the most exposed to uninsured natural catastrophes are the US, Japan, and China.
  • As of 2017, Swiss Re was the market leader in commercial parametric products. In Europe, sales of parametric insurance accounted for 2% of its revenues.
  • However, 80% of its sales in India were from parametric products. Overall, the company's parametric products were more popular in emerging markets.
  • According to the Australian and New Zealand Institute of Insurance and Finance, developing economies are prospective markets for parametric insurance, which would help reduce the global protection gap.

Research Strategy

After reviewing multiple articles in the insurance and business media, as well as reports on the insurance market and parametric insurance specifically, as well as white papers from insurance companies, we concluded that the total addressable market or the market size for parametric insurance is not available.

Media articles agree that parametric insurance is growing in popularity. However, they don't provide any figures to back up the statement, apart from statistics on natural catastrophes. Reports and white papers on the subject mostly came from Swiss Re and included the same data points on uninsured natural catastrophe loss in different regions.

The most useful source we discovered was the 2019 World Insurance Report by Capgemini, which included the share of business and individual customers that are highly interested in this type of insurance. We also analyzed the 2018 and 2020 editions to gain more insights, but they didn't discuss parametric insurance.

Please note that we searched both for information on parametric and index-based insurance since both terms are used to describe the same type of coverage.

We also visited the pages of two insurance companies that were most frequently mentioned in relation to parametric insurance — Swiss Re and Axa Global — in search of any relevant information on parametric insurance. However, we didn't uncover any data points beyond the ones that were already cited in industry articles, reports, and presentations.

Additionally, we considered triangulating the market size of parametric insurance from its market share in the overall insurance market. Unfortunately, the share wasn't available in any of the sources discussed above.

We used one source from December 2017, which provides data on Swiss Re parametric insurance sales. While it is outdated, we used it as an additional finding due to the scarcity of quantitative data on the subject. Also, we confirmed that Swiss Re is still regarded as a major player in the parametric insurance space.

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Climate Insurance - TAM

There are at least 400-500 million people around the world vulnerable to climate change impact and who are without climate insurance. At least around 100 million people worldwide are already insured against climate change risk and losses. These and other findings are outlined below.

400 Million in 2020

500 Million in 2025

Climate Insurance in Developed Countries

Research Strategy

We found no available market report or industry analysis for the size or total addressable market of climate insurance worldwide. We looked into market report databases such as Euromonitor and IBISWorld among others. There was also no industry reports, analysis or studies concerning the total size or addressable market for climate insurance in business media, scientific/academic publications and global authorities/organizations such as WWF and among others.

However, we found G7's target of climate insurance beneficiaries in 2020 to be the closest estimate of total addressable market. G7's goal focused on developing nations where there are millions of people who are both vulnerable to climate change risks and lack climate insurance. We have also provided the updated targets as of 2018 and 2019 including the 2025 vision where at least 500 million are targeted to be beneficiaries of climate insurance.

We have also provided regional breakdown for G7 target beneficiaries as well as available information for climate insurance markets in developed regions i.e. USA and Europe. Again, the lack of integrated data around the global climate insurance markets limits the scope of market size that the available information is able to address. Therefore, we gathered all relevant and publicly available data to address the query and provide the closest estimate for the request. We have outlined our findings above.

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