Generali, UNDP tackle $1.8t protection gap

Parametric policies provide pre-agreed payouts based on verified triggers.

Generali and the United Nations Development Programme (UNDP) together unveiled how parametric insurance can reduce the $1.8t protection gap—the difference between insured and uninsured losses—by offering quicker payouts and faster recovery following climate-related events.

Both Generali and UNDP’s report, titled “Parametric Insurance to Build Financial Resilience,” highlights the potential of parametric insurance to help governments, businesses, and communities financially prepare for natural hazards such as droughts, tropical cyclones, earthquakes, and other shocks. 

Unlike traditional insurance, parametric policies provide pre-agreed payouts based on verified triggers, such as specific rainfall levels, rather than on assessed losses. This approach enables faster disbursements, making it a more efficient solution for dealing with natural hazards. 

The report emphasises the importance of collaboration amongst governments, financial institutions, and insurers to ensure that parametric insurance reaches vulnerable communities and strengthens financial resilience.

Jan Kellett, UNDP’s Global and Corporate Lead on Insurance and Risk Finance, stressed the need for supportive regulatory ecosystems, noting that the insurance industry alone cannot scale parametric solutions without the help of government policies. 

Generali Global Corporate & Commercial (GC&C) CEO Christian Kanu highlighted that parametric insurance offers cost-effective coverage, particularly for underinsured communities, and can improve productivity by encouraging sustainable investments.

The report includes case studies from countries like Malawi, Mexico, and India, illustrating how parametric insurance has been used to address challenges such as food insecurity from drought, earthquake losses, and extreme heat waves. 

The UNDP-Generali partnership aims to scale financial protection through public-private collaboration, with a focus on making parametric insurance more accessible and effective in promoting sustainable development.