Severe convective storm among fastest-growing parametric covers in 2024, survey finds

By Henry Gale

April 3 - (The Insurer) - Parametric premium growth in 2024 was most pronounced for natural catastrophe perils, according to a survey of senior market participants conducted by Parametric Insurer.

Over a third of respondents who worked on severe convective storm covers said parametric premiums for the peril had increased by more than 25% between 2023 and 2024, a higher proportion than for any other product.

Tropical cyclone and earthquake covers, which represented the most premium volume in 2024 according to the survey results, were also identified by market participants as growth drivers. Almost all respondents believed premiums for those perils had grown during the year.

Parametric Insurer surveyed 35 senior market participants during March 2025, including the leaders of parametric units at several of the industry's largest (re)insurers and brokers.

The survey asked them to estimate the relative premium volume for different parametric products last year from their experience, and how volumes had changed between 2023 and 2024. The scope included (re)insurance, derivatives and insurance-linked securities.

Parametric risk transfer in its current form has existed for decades, but the market has grown significantly in recent years due to factors such as increased availability of data, growing exposures to climate risks and the pulling back of traditional (re)insurance coverage in some areas.

Hurricane and earthquake covers have played a prominent role in the segment's growth, but newer products for other natural catastrophe perils have emerged recently.

The survey results suggest that severe convective storm covers may be the fastest growing of these. Corporations have used parametric insurance to cover hail and tornado damage to property, agriculture and high-value infrastructure such as solar farms.

Some carriers have also recently started purchasing severe convective storm reinsurance on a parametric basis to cover aggregate losses that fall below the lowest layers of traditional catastrophe programs.

The quick growth of these products comes from a smaller premium base. When ranking perils by the volume of parametric premium transacted, respondents placed it lower than most other natural perils.

Most respondents observed growth in parametric flood and wildfire covers too, which also grew from a lower base.

Other weather-related products, which are usually for more frequent, less remote events, did not grow as quickly during 2024, an analysis of the survey results shows.

Parametric coverage for temperature changes, usually in derivative form, has been widely used in the energy sector for decades, although there are some newer use cases in other industries. More than two-thirds of respondents said the premium volume for temperature covers was broadly unchanged between 2023 and 2024.

Rainfall and drought covers can range from national governments insuring farming communities against unfavourable seasons to organisers covering lost revenue when rain causes outdoor events to be cancelled. Responses ranged from stable premium volume to up to 25% growth.