Questions about parametric insurance, answered plainly.
Parametric insurance is a different structure from what most operators are familiar with. These are the questions that come up most often — before a quote, during underwriting, and after a trigger event.
Parametric insurance fundamentals
Parametric insurance pays based on an objective index reading — a weather measurement, a seismic value, or another external parameter — rather than a documented assessment of your actual losses. If the index crosses a predetermined threshold, the policy pays. The payment is fixed at the time of binding, not calculated after the fact.
Example: a drought policy might pay $200,000 if the SPI-3 drought index at a designated weather station drops below −1.5 for more than 30 consecutive days during a specified season. When that happens, payment is made. No adjuster, no documentation review, no dispute.
Traditional insurance (both crop and commercial property) requires a loss to occur, be documented, and be adjusted before any payment. That process takes weeks to months. Claims are frequently disputed. Documentation requirements are onerous. And insurers have both the incentive and the ability to contest valuations.
Parametric insurance removes all of that. There is no adjuster. Payment is triggered by an objective data point, not by your ability to prove a loss. The trade-off — which we're transparent about — is that the index may not perfectly correlate with your actual losses in every event. That's basis risk, and we address it directly.
Both models exist in the market, and the right answer depends on your situation. Many clients use parametric coverage to fill gaps in traditional coverage — events that traditional policies exclude, waiting periods before traditional coverage activates, or loss categories that are difficult to document (like cash flow disruption).
Other clients use it as their primary weather risk transfer mechanism where traditional coverage isn't available or is prohibitively expensive. We assess each situation individually and will tell you if we don't think parametric is the right structure for your exposure.
How triggers work
We use publicly accessible, independently verifiable data sources operated by federal agencies. Our primary sources are NOAA's Global Historical Climatology Network (GHCN), FAA Automated Surface Observing Systems (ASOS), and the Citizen Weather Observer Program (CWOP) network.
All of our indices — drought (SPI-3), precipitation deficit, frost degree days, wind speed exceedance, ice accumulation, atmospheric river — are calculated from raw station data using documented, reproducible formulas. The calculation methodology is disclosed in the policy schedule so clients and brokers can verify independently.
We select the station with the highest historical correlation between its readings and the type of weather events that damage your operation. We analyze a minimum of 15 years of historical data and run correlation analysis against regional yield, operational, or infrastructure loss records where available.
If a single station doesn't provide sufficient coverage, we structure multi-station policies that average or weight readings across a network. Station selection methodology is documented in the policy schedule.
Every policy designates a backup station. If the primary station reports fewer than 85% of expected readings in a measurement period, the backup station data is substituted using a documented interpolation formula. The backup protocol is specified in the policy at binding — not determined after an outage occurs.
How payouts work
The 72-hour clock starts when the trigger condition is confirmed by the data source. Confirmation happens automatically — our systems monitor all designated data stations continuously. When a trigger is confirmed, we initiate payment verification (identity and bank account on file) and process the wire transfer. The contractual commitment is payment delivery within 72 hours of trigger confirmation.
There is no notification required from you. There is no claim form. There is no adjuster visit. If the index crossed the threshold and the data confirms it, payment happens.
Payment amounts are set at binding — they're fixed in the policy schedule. You know exactly what you'll receive when a trigger fires. We work with clients during the underwriting process to set payment amounts that approximate expected loss exposure for their trigger event type.
Depending on the policy structure, there may be multiple trigger thresholds with different payment amounts, or a single threshold with a single payment. All payment levels are disclosed in the policy schedule before binding.
Yes, depending on the policy structure. Policies can be written with per-occurrence payment limits and a seasonal aggregate cap. The number of eligible trigger events per season, per-event payment, and total seasonal limit are all specified at binding.
The thing every client should understand
Basis risk is the possibility that the index doesn't perfectly capture your actual loss. Two scenarios: (1) the index triggers but your operation didn't suffer a meaningful loss — you receive payment for an event that didn't hurt you; (2) your operation suffers a loss but the index doesn't trigger — you don't receive payment.
We address this honestly because the second scenario is the important one from a client protection standpoint. Careful station selection, correlation analysis, and threshold calibration reduce basis risk, but can't eliminate it entirely. Parametric insurance is most appropriate when the correlation between the index and your exposure is high and documented.
We run correlation analysis between the proposed trigger index at the proposed station and historical loss data before recommending a trigger structure. If correlation is below our underwriting threshold, we either adjust the station selection, modify the index, or decline to quote.
We also disclose the R² correlation figure and confidence interval in the underwriting report for each policy. Clients see the historical basis risk profile before they bind — including years where the index would have missed a loss event.
Getting a policy in place
Initial quotes for standard exposure types (grain crop drought, wind for infrastructure, frost for specialty crop) take 5–7 business days after we receive an intake submission. Complex structures — multi-trigger, multi-location, or novel index types — take longer.
The intake submission requires location data (GPS or address, acreage or asset profile), a description of the weather exposure, any available historical loss records, and the policy period you're targeting. Brokers can submit on behalf of clients.
For agriculture: operation type, location, acreage, crop type, growing season, and a description of how weather has historically affected yields or revenue. Historical loss records, if available, improve quote accuracy but are not required.
For infrastructure: asset type and location, operational exposure to weather (what weather events cause operational disruption and how), and the financial magnitude of a typical disruption event.
We work with both. Operators can submit directly through our contact form or by email. Brokers can submit on behalf of clients and are recognized in the policy. We don't require a broker intermediary — and we don't pay fees that discourage direct relationships.
We don't publish hard minimums or maximums, but there are practical limits driven by transaction economics. Trigger design involves meaningful underwriting work — station selection, correlation analysis, policy schedule documentation. For policies where the expected payout is below approximately $50,000, the transaction cost is often disproportionate relative to the coverage value. We'll tell you directly if we think the economics don't support a placement.
On the upper end, our capacity at this stage supports policy limits in the range of $250,000 to $2 million for individual placements. Larger programs can be discussed on a case-by-case basis through our carrier partners.
Nothing happens — and that's an important thing to understand before you buy the product. If the SPI-3 reading comes in at −1.48 against a trigger threshold of −1.5, the policy does not pay. There is no adjuster discretion, no "close enough" provision, and no dispute mechanism for near-miss events. The threshold is a contractual term, and the index either crossed it or it didn't.
This is the same binary clarity that makes parametric insurance fast and dispute-free on trigger events. The rule that eliminates disputes when the index triggers also applies when it doesn't. If near-miss scenarios concern you, that's a signal to discuss threshold placement carefully during trigger design — we can evaluate historical near-miss frequency and discuss whether the threshold calibration needs adjustment.
Licensing and regulatory questions
Riskwright is a parametric MGA — a Managing General Agent that specializes in index-triggered climate policies. We are not a licensed insurance carrier or a reinsurer. We design the trigger structure, conduct correlation analysis, price the premium, and administer payouts. Policies are placed through admitted carrier partners and surplus lines markets, in compliance with applicable state regulatory requirements.
We are pursuing state insurance filings as we scale and are in regulatory discussions regarding our policy structures in our primary markets. We'll tell you directly what our regulatory position is in a given state before you commit to anything. If a state's framework doesn't support the structure we're proposing, we'll say so rather than place a product that doesn't comply.
Policies are documented in a standard parametric contract that specifies the trigger definition, data source, calculation methodology, payment amounts, backup station protocol, and policy period. The contract includes a dispute resolution process for data integrity disputes (i.e., whether the official data correctly reflects actual conditions) — though because payouts are based on objective data, disputes are rare.
In some cases yes, in most cases no — and the honest answer involves the federal subsidy structure. MPCI is heavily subsidized by USDA's Risk Management Agency, often at 50–65% of actuarially fair premium. That subsidy makes MPCI significantly cheaper than its market price. Replacing it with a commercial parametric policy means paying commercial rates for coverage without that subsidy.
For most grain producers, the most rational structure is to keep MPCI for the subsidized indemnity coverage it provides and add a parametric layer for the timing gap MPCI doesn't solve — cash flow support during the growing season while the MPCI claim is in process. Parametric as a complete MPCI replacement is more appropriate for entities that don't qualify for MPCI (co-operatives, lenders, infrastructure operators) or for exposures MPCI doesn't cover.
Talk to our underwriting team directly.
We answer every inquiry ourselves — no automated response queue. If we can't help you, we'll tell you why.