After a catastrophic earthquake, how fast a business can get cash matters as much as how much coverage it holds, according to James Gasco, head of Canada at Swiss Re Corporate Solutions. That's the gap parametric insurance is designed to close, working alongside traditional coverage rather than replacing it.
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"We wouldn't necessarily describe parametric insurance as better than traditional insurance. The two play complementary roles," Gasco said. Traditional insurance remains essential for protecting physical assets, he said, but following a major earthquake, assessing damage and adjusting claims takes time, time a business may not have.
Parametric insurance addresses gaps left by deductibles, sublimits and exclusions in traditional policies, Gasco said, while also solving a problem traditional insurance structurally can't: the immediate need for liquidity.
"Rather than waiting for the physical loss to be assessed, payment is based on a pre-agreed event parameter," Gasco said. "Once authoritative data confirms that the agreed threshold has been met, the coverage can respond."
That structure can take different forms depending on the risk, Gasco said. A parametric earthquake policy might use magnitude or the intensity of ground shaking at a specific insured location as its trigger. The choice between those approaches, and how the threshold itself gets set, depends on the specific asset being covered and how directly its risk correlates with a measurable, third-party-verified event characteristic.
"The important distinction from traditional insurance is that the trigger is based on the intensity of the event rather than waiting to establish the policyholder's ultimate incurred loss," Gasco said. Policyholders must still ultimately demonstrate they incurred direct costs from the earthquake, he said, but the coverage itself can respond as soon as authoritative data confirms the necessary severity threshold has been reached, without waiting on a full damage assessment.
Gasco declined to put a specific timeframe on parametric payouts in general, since timing depends on the individual policy and its trigger. But Swiss Re Corporate Solutions' own record offers a benchmark, Gasco said: its recent US parametric claims have all been paid in under 30 days, and after Hurricane Melissa it paid claims in 72 hours. That gap between traditional claims timelines, which can stretch for months as damage assessments and adjustments work through the process, and a parametric payout measured in days is where much of the coverage's practical value shows up for a business trying to keep operations running.
What matters most, Gasco said, isn't the exact speed, but what that liquidity allows a business to do in the earliest, most critical stage of recovery.
"It could be used for emergency response and temporary repairs, rerouting cargo, securing additional storage, retaining workers, meeting working-capital requirements or absorbing higher post-event operating costs," Gasco said.
That capital arrives, he said, precisely when a business may be facing significant costs that traditional insurance claims don't cover and before public recovery programs are fully underway.
Despite that advantage, parametric coverage remains underused in Canada relative to its potential application to catastrophic infrastructure risk. Gasco was cautious about speculating on why individual businesses or governments haven't adopted it more widely, since that wasn't something he could assess directly.
"Parametric insurance is still a developing part of the risk-transfer toolkit, and the important point is that it isn't intended to replace traditional insurance," Gasco said. Its value, he said, lies specifically in addressing the vulnerability that emerges after a catastrophic event: the gap between an immediate need for cash and the time required to assess physical damage, resolve traditional claims, and put broader recovery funding in place.
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For critical infrastructure specifically, Gasco said, that gap matters more than it might for other assets, since so much of the early recovery period depends on an organization's ability to act quickly rather than simply on whether the damage is ultimately repairable. A port, an airport or a utility network doesn't just need to eventually be rebuilt, he said; it needs the businesses depending on it to keep functioning in the meantime, which is a financial problem as much as a construction one.
"It's also about whether an organization has the financial resources to make decisions quickly in the first days and weeks after an event," Gasco said.
