Latin America emerges as key growth market for parametric insurance

Escalating climate volatility, underinsurance and balance sheet pressures are accelerating demand for parametric solutions across Latin America. Alejandro Solorzano, of Augment Risk, explains why the region represents a major opportunity – and why disciplined design and transparency are critical as the market matures.

Key points:
Underinsurance accelerates parametric growth
Sophisticated buyers demand transparency
Miami anchors LatAm parametric development

Latin America is rapidly becoming one of the most important growth markets for parametric insurance, driven by increasing climate volatility, rising awareness of underinsurance and the need for faster, more capital-efficient risk transfer solutions.

Alejandro Solorzano, head of LatAm parametric at Augment Risk, says parametric is no longer viewed an experimental product, but as a complementary tool alongside traditional indemnity insurance. “Parametric is no longer a novelty. People have seen it in action,” he told Miami Reinsurance Week Today. 

That approach is particularly important in Latin America, where risk profiles, regulatory frameworks and economic conditions vary significantly between countries. Solorzano noted that Augment Risk is active across multiple regional markets, requiring structures that can be applied consistently while remaining sensitive to local conditions. “Each country has different realities and regulations,” he said. “The focus is on building repeatable and efficient structures that can work across jurisdictions.”

Miami the hub

Miami has emerged as a central hub for this activity, connecting Latin American buyers to global insurance and reinsurance capital. Solorzano said. “Decision-makers come here to explore how traditional indemnity and parametric solutions can combine more efficiently.”

Three powerful forces are shaping demand. First is escalating climate volatility. Recent years have seen severe weather events across the region, from Brazil through to Mexico and the Caribbean. “Clients that once focused on single, major perils are now seeing how quickly losses can emerge from multiple events,” he said.

The second driver is underinsurance. Many corporates and public sector entities recognise  their existing programmes do not adequately address economic loss. “Clients acknowledge they are underinsured,” he said. “Parametric allows them to improve efficiency by adding limits, adjusting thresholds or creating capital-efficient structures that improve resilience.”

Speed of payment is a key advantage, and increasingly attractive as balance sheet pressures intensify.

 “Having independent data and calculation agents ensures transparency and trust.”

Sophisticated needs

Those pressures form the third driver of growth. Both public and private sector organisations seek to optimise cash and manage volatility more effectively. Solorzano points to the increasing role of the public sector in driving adoption, with several large parametric placements demonstrating that the product has secured a clear position in the market.

As the market expands, buyers are becoming more sophisticated. Repeat purchasers in particular are asking more detailed questions around basis risk, data sources and back-testing. “Clients are far more sophisticated than before,” Solorzano said. “They want to understand how historical losses would have been covered and how well structures correlate with actual outcomes.”

This places greater responsibility on brokers. Solorzano stresses that parametric design requires deep analytical work and close collaboration with both clients and markets. “This isn’t something you take off the shelf and place,” he said. “It requires historical analysis, sensitivity testing and multiple iterations to get the balance of pricing, product and coverage right.”

“Poorly designed products can damage confidence in parametric as a whole.”

He also highlights common pitfalls, including over-simplified triggers, overly complex structures and insufficient testing across different event scenarios. Understanding data sources, particularly the growing use of satellite and remote sensing data, is essential. “You need to understand how the data works in the real world and how climate trends are evolving.”

Transparency means confidence

Transparency becomes even more critical as programmes scale. Solorzano emphasises the importance of clear index construction, policy wording and payout mechanics, particularly on multi-million-dollar transactions. “Poorly designed products can damage confidence in parametric as a whole,” he said.

Independent third-party data sources and calculation agents are increasingly used to provide clarity and neutrality, he added.

Looking ahead, he expects greater standardisation of best practices across the LatAm parametric market, including multi-region and multi-trigger structures aligned with client modelling and capital objectives. “Parametric is becoming an important tool for improving financial performance and resilience,” he said.

Talent will be central to that evolution. Solorzano describes parametric as an incubator for the future of broking, combining relationship-driven expertise with advanced analytics and data science. “Everything in parametric is about data and optimisation,” he says. “That’s where new skill sets are being developed.”

For Augment Risk, parametric is a core strategic focus. “The firm believes strongly in it and invests in people, analytics and product development,” Solorzano said. As competition for expertise intensifies, that commitment may help shape the next phase of Latin America’s evolving parametric market.

Alejandro Solorzano is head of LatAm parametric at Augment Risk. He can be contacted at:  Alejandro.Solorzano@augmentrisk.com.

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