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Parametric insurance
Parametric insurance pays a set amount when a specified event parameter is met. It does not measure your house. NAIC describes the contract that way. Its worked example is an earthquake of magnitude 5.0 or greater paying $100,000. Basis risk is the named downside. This is not replacement cost, not building code upgrade coverage, and not a wildfire product listed on this site.
You are holding two quotes. One is a homeowners form that will send an adjuster. The other pays if a named index, a magnitude, or a warning signal hits a number, even if your kitchen is intact, or pays nothing if the index misses while the kitchen burns. Those are different contracts.
This is an insurance satellite of /insurance/. It is not a second hub. No g3-passed exhibit matches this object. The scene is the two quotes. Do not use a house-level hub graphic as a policy form.
Why it matters
People hear “parametric wildfire” and expect a faster homeowners claim. NAIC’s page is disaster-parameter contracts, mostly earthquake, hurricane, drought, and typhoon examples. Speed is real on that page. So is basis risk. Treating an index payout as a rebuild check, or as a Safer from Wildfires credit, produces the wrong file. IBHS does not replace adopted code. Neither does this contract.
How the documents split
| Object | What it pays | What it is not |
|---|---|---|
| Indemnity homeowners | Loss to the described property, after deductible, subject to limits | A parameter hit |
| Parametric | A stated sum when the specified parameter is verified by a named third party | A measurement of your kitchen |
| Hybrid (as NAIC describes) | Immediate parameter sum, then adjustment toward indemnification | A substitute for dwelling limits |
| Building code upgrade | Extra cost of ordinances at rebuild | An index |
| FAIR Plan | Residual fire coverage | Parametric |
NAIC’s page does not contain the word wildfire. This site does not invent a wildfire trigger.
The paths
1. Read the trigger. NAIC says the contract must specify the payment amount, the parameter, and the third party that verifies it. The third party is usually a government agency. If the primary agency cannot issue the reading, a backup verifier may be named.
2. Expect speed, not a rebuild. NAIC says dropping claims adjustment can move money in weeks rather than months or years. That money is the contractual sum. It is not Class A as an assembly. It is not a permit.
3. Price basis risk. NAIC calls it the obvious downside. Losses can be larger or smaller than the payout. Losses can occur without a trigger. The Malawi drought example on that page is agricultural. The mismatch is the same idea. NAIC notes a more expensive product can be structured to bias toward overpayment if the buyer is especially worried about underpayment.
4. Stack, do not swap. NAIC says a parametric policy can pay an amount equal to a deductible on an indemnity policy, or run as a hybrid. It does not replace California FAIR Plan or Oregon FAIR Plan. It does not replace CWUIC or R327.
5. Regulation. NAIC says few jurisdictions have parametric-specific rules, so the products generally sit under the same solvency and market-conduct framework as traditional policies. Some legal frameworks that require proof of loss can slow the payment. That sentence is NAIC’s, not an Oregon or California product filing.
What people mix up
- Treating a parameter hit as proof the house is a total loss.
- Treating a parameter miss as proof there was no fire.
- Treating parametric as Safer from Wildfires or IBHS.
- Treating NAIC’s earthquake example as a wildfire product sold here.
- Treating a fast payout as ordinance or law.
How to check
- Open the NAIC parametric page.
- On any quote, write down the parameter, the verifier, and the dollar amount. If any of those three is missing, stop.
- Write down what happens if the house burns and the parameter does not hit.
- Keep the indemnity form. See building code upgrade coverage.
- Confirm with DFR or CDI whether the form is even offered in your state. This page does not list one.
Limits
This page does not sell a policy. It does not inventory a wildfire parametric product. NAIC’s page, last updated 21 December 2023, has no wildfire example. FireApproved is not NAIC, not CDI, and not DFR.
Related records
Questions
If a wildfire burns my house, does a parametric policy rebuild it?
Not as NAIC describes the contract. Parametric insurance pays a set amount based on the magnitude of a specified event, not based on the magnitude of your losses. NAIC’s worked example is an earthquake of magnitude 5.0 or greater paying a stated sum. Rebuild cost is an indemnity question. See building code upgrade coverage.
What is basis risk?
NAIC names it as the obvious downside. Your economic losses can differ from the payout by any margin, or you can have losses without the parameter triggering. The Malawi drought example on that page is agricultural, not a Bend house. The mechanism is the same.
Is this a California Safer from Wildfires credit?
No. Safer from Wildfires is a rating-credit list for wildfire-rating admitted insurers. Parametric is a different contract. IBHS is a designation. None of those three is the other.
Does Oregon or California license a wildfire parametric for homeowners?
The NAIC page opened here does not list one. It says few jurisdictions have regulation specific to parametric policies, so they generally sit under the same framework as traditional policies. This site does not sell or inventory a product.