Parametric insurance and catastrophe bonds
Reinsurance, catastrophe bonds and parametric insurance appear on only 25 recent papers in the finance and operations research journals, although catastrophe bond issuance has reached records and parametric covers are spreading to poorer countries. Do payouts arrive when they are needed, and who bears the basis risk?
What prompted this
Since October 2025, 25 papers carry a catastrophe-bond, insurance-linked, parametric-insurance or reinsurance keyword (20 in finance journals, 3 in operations research): "reinsurance" on 9, "parametric insurance" on 5, "catastrophe bonds" on 5. Natural disasters, by contrast, appear on 82 papers, and climate risk on 242.
Questions
- How often do parametric triggers miss real losses (no payout after damage, or payout without damage), and does the basis risk fall on governments or households?
- Do catastrophe bond spreads price climate trends, or only the last few years of losses?
- Does the record issuance of catastrophe bonds lower reinsurance prices for primary insurers, and does that reach policyholders?
Data that could help
Catastrophe bond terms and spreads (public issuance data), parametric programme payouts (for example the Caribbean and African risk pools), and loss data from disaster databases such as EM-DAT.
Next step
Match the payouts of regional parametric risk pools since 2015 to reported disaster losses and compute the share of events that triggered no payout.