The IAIS has published the Issues Paper on Index-based Insurances particularly in Inclusive Insurance Markets. Index-based insurances are insurance contracts in which a claim is defined with reference to a pre-determined index (sometimes also referred to as parametric insurance).
Since index-based insurances are increasingly looked to as a means to manage weather and catastrophic events, support food security and enhance access to insurance, this Issues Paper provides background on this product, describes practices and actual examples and identifies related regulatory and supervisory issues and challenges.
The main focus of the paper is on weather-related or natural catastrophe event risks.
The paper addresses various issues typical to index-based products such as:
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The way the product is designed as a micro, meso and macro scheme which affects the role of the policyholder and expectations of the end customer;
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The roles of various stakeholders; in particular, those not usually seen in conventional insurance such as government agencies and, for example, ministries of agriculture, agencies involved in data and statistics and donors and sponsors;
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Legal certainty, insurable interest and the nature of the product as insurance; and
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Issues relating to consumer protection including the development of the product and importance of proper consideration of basis risk, setting a sound and credible index and the role of subsidies.
Full issues paper
© IAIS - International Association of Insurance Supervisors
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