This goes far beyond weather...

Parametric insurance might no longer be a niche experiment, but its next phase of growth depends on solving one simple problem: helping buyers understand what it actually does.

“Parametric’s worst enemy is its name,” says the founder, chief executive and president of LIRG, Mark Groenheide, who has been nominated for Leaders in Parametric. 

“You see a lot of equations in these policies, and hear the name parametric and very few people really know what that is. But really it’s just fact-based insurance. It’s for events, and if these things happen, you get paid, often before an adjuster can reach the site, using satellites and digital tools to verify losses.”

That view has been shaped by more than a decade of working with parametric insurance, first as an underwriter and later leading businesses focused on the market.

Groenheide was managing a US construction portfolio exposed to natural catastrophe risk across south Florida and New York when he first turned to parametric cover. The challenge was practical – the business had significant catastrophe exposure, but limited capital available in the US.

“We didn’t have a huge amount of capital in the US, even though we were part of a large company,” he said. “We needed a way to protect the net.”

Parametric cover became, in his words, “one arrow in our quiver”.

It was never intended to replace traditional reinsurance, he said, but to complement it by providing rapid protection when predefined conditions were met. Over the following year, three policies triggered and paid out against objective parameters. Groenheide said the experience helped clarify where parametric insurance fits.

Groenheide is careful not to overstate its role. Parametric is not a cure-all, nor a substitute for every form of cover. But when designed well, he argues, it can provide something buyers often expect from insurance but do not always receive: speed, clarity and confidence at the point of loss.

That claims experience remains central to how he thinks about adoption. “Everyone I’ve had a claim experience with on the parametric side has gone back and purchased more,” he said.

For him, that remains the industry's strongest argument. Buyers might need time to understand the mechanics, but once a policy performs as intended, its value becomes much easier to appreciate.

It also speaks to a wider issue in insurance. Traditional products can perform exactly as written and still leave clients disappointed. The problem, he said, is often not the wording itself, but the expectation gap between what insurance buyers think they have bought and what the policy is designed to do.

Parametric cover narrows that gap by putting the trigger at the centre of the transaction, he explained. If the agreed event occurs and the data confirms it, payment follows.

That simplicity has shaped Groenheide’s career. After working on placements that combined traditional and parametric cover for large corporate clients, he went on to co-found NormanMax, the first exclusively parametric syndicate at Lloyd’s of London.

Today, Groenheide leads LIRG, which combines reinsurance, brokerage and underwriting capabilities. The business is on target to achieve £500 million in gross written premium during its first year.

“Everyone I’ve had a claim experience with on the parametric side has gone back and purchased more.”

No solution for ‘bad planning’

But Groenheide is careful not to present parametric as a fashionable answer to every emerging risk. In some areas, he argues, the insurance discussion can obscure more uncomfortable truths.

Where many in the market view rising catastrophe losses mainly through the lens of climate volatility, Groenheide places greater emphasis on exposure, engineering and planning.

“I’m not such a believer that there’s an increase in climate volatility,” he said. The losses, he argues, are often driven by where and how assets have been built: too much property concentrated along coastlines, green space replaced by hard surfaces, wetlands removed, and urban infrastructure designed without sufficient regard for water, wind or seismic exposure.

“There’s no traditional insurance solution for bad city planning,” he said.

For Groenheide, that distinction matters. Insurance can transfer risk, but it cannot reverse decades of planning and development decisions.

That is also why he sees parametric insurance as part of a broader resilience conversation. Because it is underwritten around probability and objective triggers, it can provide protection in places where conventional insurance struggles, including risks that are difficult to adjust, difficult to insure traditionally or where rapid liquidity matters more than precise indemnity.

California earthquake risk is one example he cites. Much of Los Angeles was built before modern seismic codes, and conventional earthquake insurance penetration remains limited. In the event of a major quake, he argues, much of the burden would fall on the government and the Federal Emergency Management Agency rather than the private market.

Yet demand might not grow meaningfully until after a major event. That, for Groenheide, is one of the persistent challenges facing parametric insurance: the product is often most clearly understood after it has been needed.

The next frontier

The next phase of growth, however, might come from risks that look very different from the natural catastrophe exposures that first brought parametric into wider use.

Cyber is one of them. LIRG has provided reinsurance capacity behind a cyber warranty product with DLT Alert, a structure Groenheide describes as pioneering.

“Cyber is a 21st-century exposure; parametric’s a 21st-century product,” he said.

The attraction is not simply speed of payment. It is also transparency and aggregation control. Fixed limits and clear triggers can create a cleaner structure for capital providers and insureds in a class where accumulation, attribution and claims complexity remain major concerns.

He sees similar potential in earnings protection for large captives, where companies night wish to retain risk but need more structured ways to protect against volatility. Commodity price protection, for example, can move from something resembling a futures contract into an insurance structure that fits within a captive framework.

Space is another area where Groenheide expects parametric structures to grow. Rocket launches, satellite downtime and low-Earth-orbit collisions all lend themselves to measurable events and defined payouts. As geopolitical risk extends into orbit, he believes traditional approaches will struggle to keep pace with the nature of the exposure.

Within five years, Groenheide expects parametric elements to appear inside most traditional insurance policies – not as a replacement, but as a complement.

“We’ve only just begun,” he said. “We’re not people’s competition. We’re their competitive edge.”

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