Parametric insurance market set to double by 2033

The manufacturing sector held the largest share of the market in 2023. 

The parametric insurance market, valued at $18b in 2023, is projected to reach $34.4b by 2033, growing at a compound annual growth rate (CAGR) of 6.6%, according to a report by Allied Market Research. 

The market’s growth is primarily driven by the increasing frequency of natural disasters, climate-related events, and the need for faster, more transparent claims processing.

Natural catastrophe insurance dominated the market in 2023, largely due to the effects of climate change. 

The integration of advanced technologies and data analytics has enhanced risk assessment and pricing, contributing to the segment’s strong performance. Specialty insurance, which accounted for nearly a quarter of the market in 2023, is expected to grow at a higher rate with a CAGR of 9.4%. 

This growth is attributed to its ability to address complex risks, especially as organisations face rising commercial insurance prices.

From an industry perspective, the manufacturing sector held the largest share of the market in 2023. 

The need for comprehensive insurance solutions in manufacturing is driven by the sector’s vulnerability to losses from equipment failures, accidents, and natural disasters. The complexity of global supply chains also heightens the risk for manufacturers, making parametric insurance an attractive option.

Meanwhile, the construction segment, which represented nearly one-third of the parametric insurance market in 2023, is forecasted to experience the highest growth with a CAGR of 10.4%. 

This sector's rapid expansion is due to increased urbanisation, large-scale development projects, and exposure to risks such as project delays, equipment malfunctions, and liability claims. 

Despite these growth drivers, the lack of awareness about parametric insurance solutions remains a challenge for the market. However, the rising adoption of technology and evolving insurance needs across industries are expected to continue driving the market forward over the next decade.