Even as insurers and insurance buyers alike grapple with sizable losses from weather-related risks, property insurance market conditions remain favorable to buyers. That’s creating opportunities for companies to reinvest property insurance savings to strengthen their risk transfer portfolios more broadly.
One potential opportunity: parametric insurance, which can provide rapid liquidity, help address coverage gaps, and complement traditional insurance programs. Here’s how organizations can capitalize on parametric options.
Persistent catastrophe losses reshaping risk financing
In the first half of 2026, global insured losses from natural catastrophes totaled $42 billion (opens a new window), according to the Swiss Re Institute. That’s well below the first-half average of $65 billion from 2021 through 2025 and less than half of 2025's $91 billion, which was the highest first-half total since 2011.
While this respite may be welcome, it is unlikely to last. Swiss Re reports that insured natural catastrophe losses have exceeded $100 billion in eight of the last nine years (opens a new window). And Verisk estimates the insurance industry should anticipate average annual insured catastrophe losses of $171 billion (opens a new window) going forward.
Importantly, many of the losses from natural catastrophes are absorbed by businesses and others rather than insurers. According to Munich Re, the “insurance gap” (opens a new window) — the share of total economic losses that are uninsured — for the first half of 2026 was 60%.
Property insurers and policyholders are also contending with a broader range of catastrophe threats. Severe convective storms (SCS), wildfires, and floods have often been viewed as "secondary" perils because they typically generate smaller losses than hurricanes and earthquakes. Yet according to Munich Re, more than 90% of insured natural catastrophe losses in 2025 (opens a new window) — $98 billion out of $108 billion — came from these secondary perils, largely from U.S. events.
The Southern California wildfires alone generated $40 billion in insured losses in 2025, according to estimates from both Swiss Re and Munich Re, a record for a wildfire event. Meanwhile, SCS losses topped $50 billion in 2025 for the third consecutive year, and U.S. severe thunderstorms were the largest loss driver in the first half of 2026.
Climate change may further amplify these challenges. A study published in Science in August found that temperature changes in the Galápagos Islands as a result of El Niño events — a wind pattern that warms surface waters in the Pacific Ocean — have increased in intensity by 36% over the last 40 years (opens a new window).
In years when El Niño is strong, extreme weather events — including flooding, droughts, and heat waves — can occur more frequently, raising costs for insurers and businesses. And this year, the United Nations’ World Meteorological Organization says it’s a near certainty that “El Nino will persist through September-November 2026 and December 2026-February 2027.” (opens a new window)
A different risk transfer approach
The property insurance market continues to soften, supported by abundant capacity and strong competition. For risk professionals, these conditions make it an ideal time to reassess catastrophe risk financing strategies. One option is parametric insurance, which has evolved from a niche solution into one of the industry's fastest-growing segments.
Parametric insurance pays when a predefined event reaches an agreed threshold. Triggers may be based on hurricane intensity, earthquake ground motion, hail size, flood levels, or wildfire proximity. If the trigger is met, the policy pays according to a predetermined formula, providing rapid access to funds for physical damage, business interruption, extra expenses, and other economic impacts.
Parametric insurance can help organizations fill in some of the large gaps in coverage that can be left by traditional property insurance policies that policyholders may be unaware of or may underestimate. For many organizations, however, parametric insurance’s greatest value is not the amount recovered but the speed of payment.
Because payouts are based on objective triggers rather than loss adjustment, parametric claims can often be resolved in weeks. This allows policyholders to bypass the monthslong (or, in some cases, yearslong) processes that are typical for traditional property claims.
Following a catastrophe, parametric policyholders can quickly access capital to support employees, secure contractors, begin repairs, restore operations, and address cash flow needs. And because payouts are tied to events rather than sustained losses, parametric insurance buyers have flexibility in how they spend those payouts; traditional insurance, on the other hand, typically requires that payments be used to repair or replace insured properties and other assets. When recovery resources are scarce, these rapid payouts can help preserve cash reserves and accelerate recovery efforts.
Parametric insurance also offers relative pricing stability. While traditional property insurance rates can fluctuate significantly as catastrophe losses and market conditions change, parametric pricing tends to be more consistent.
Targeted approaches
Organizations can reinvest some of their premium savings into additional catastrophe protection, helping secure capacity and improve long-term budget predictability. Importantly, parametric insurance should be viewed as a supplement to traditional property coverage, not a replacement.
Traditional policies should remain the primary source of protection against property damage and business interruption. Additional parametric coverage can help organizations address several catastrophe-related risk financing challenges, including:
Offsetting large wind/hail, hurricane, or other catastrophe deductibles, thereby reducing retained risk.
Securing additional limits when traditional markets cannot provide sufficient capacity or when lenders require higher levels of protection.
Addressing specific perils, such as wildfire, where traditional coverage may be limited, expensive, or unavailable.
Many options for buyers Growing interest in alternative risk financing and advances in data and modeling capabilities have attracted new carriers and capital to the parametric market. Buyers now have access to more providers offering broader and more flexible solutions. Policies can be structured to cover multiple locations under a single program, with limits and trigger mechanisms tailored to individual sites while operating within a unified framework. For example, a company with locations across the U.S. may face different catastrophe exposures in different regions. A single parametric program can allow the company to:
Set unique limits, geographic trigger areas, and covered perils for each location.
Generate specific payouts for individual locations when a qualifying event affects multiple properties, based on the predefined trigger and payout schedule, with payments aggregated across the policy.
Insure multiple perils, such as hurricane protection for Gulf Coast properties and earthquake or wildfire coverage for California locations.
The market is also expanding beyond traditional catastrophe risks. Emerging applications include revenue protection solutions for weather-sensitive businesses and specialized products for exposures that have historically been difficult to insure parametrically, including straight-line wind risks. Building effective structures — with the right partners Parametric insurance can benefit many organizations with catastrophe exposures. But it’s not the right solution for every business or risk management challenge. Parametric solutions can be especially valuable for organizations that have faced:
Capacity constraints.
Lengthy catastrophe claims processes.
A need for immediate post-event liquidity.
Businesses with limited catastrophe exposure or highly mobile assets, such as trucking fleets, may find fewer applications. Effective program design is critical to maximizing value. Rather than starting with a target premium or limit, buyers should structure coverage around their risk profiles and recovery objectives. Equally important is understanding how triggers work and ensuring payout scenarios align with realistic loss events. Carrier selection also matters. Buyers should seek insurers with:
Strong financial backing.
A proven track record of writing parametric policies and paying out claims.
Expertise in the specific perils they wish to insure.
Because carriers may use different data sources, models, and trigger methodologies, coverage structure should be evaluated alongside pricing. Finally, choosing the right broker is key, especially because parametric policies rely on carefully designed triggers and payout structures. If you’re thinking about purchasing a parametric policy or expanding your use of parametric solutions, it’s essential that you work with advisors who understand the underlying modeling, can assess multiple carriers, and can help you align coverage with your unique risk financing objectives. Parametric insurance is one of several topics Lockton will explore during our 2026 Global Alternative Risk Solutions Summit on Oct. 15 in Nashville, Tennessee. Click here to learn more and to register. (opens a new window)