Last year, in a previous blog article, I explored the concept of parametric insurance and how its novelty presents an attractive insurance option for both insurers and consumers—especially when traditional insurance products may fall short in managing and mitigating risk effectively.
Parametric insurance covers the probability of a predefined weather-related event, such as windstorm, flood, snow, wildfire, tornado, cyclone or earthquake, rather than the actual loss or damage incurred. Indemnification is based on the event’s proximity and magnitude, as measured, and reported by the appropriate state or federal government agency.
This means that when a triggering event, such as specific wind speed, rainfall or earthquake occurs, the insurer pays the policyholder a set amount of money based on the event’s magnitude, not the resulting losses or damages.
This innovative approach first gained traction in Alabama, Louisiana, Florida and Puerto Rico. Today, New York state may be on track to join this trend with the introduction of New York State Department of Financial Services departmental bill, S.9420, sponsored by Sen. James Skoufis, D-42, and A.10344 sponsored by Assemblywoman Gina L. Sillitti, D-16, which would authorize parametric insurance as a permissible insurance product in the state.
More specifically, the legislation would require insurers and excess-line brokers to disclose in insurance applications that parametric insurance policies aren’t substitutes for property or flood insurance, which provide more comprehensive coverage for losses.
It also stipulates that mortgagees or loss payees cannot accept parametric insurance policies, and it holds parametric insurance to the same consumer protections as other personal-lines insurances, including cancellation and nonrenewal requirements as outlined New York Insurance Law Section 3425.
The introduction of this bill in the Senate and Assembly at a late stage of the legislative session, followed by its swift inclusion on the May insurance committee agendas of both houses, highlights its expedited progression through the legislative process.
Next steps
PIANY strongly supports S.9420/A.10344 because it offers New York insurance consumers more choices and legitimizes parametric insurance by allowing the DFS to regulate it. This means only licensed insurance producers can sell and service these products, ensuring proper regulation, transparency and consumer trust.
As the legislative session winds down, PIANY remains informed and engaged, and will monitor the bill’s progression in both houses. This vigilant oversight ensures that PIA can weigh in on any new developments to the legislation in a timely manner.
Theophilus Alexander
Theophilus W. Alexander joined PIA Northeast as a government & industry affairs specialist for the Government & Industry Affairs Department in 2023. Prior to joining PIA, Theo had served in both houses of the New York State Legislature. Previously, he worked as a legislative analyst for Hon. New York State Sen. Samra G. Brouk, D-55, and he served at the New York State Assembly, as a policy analyst with New York Assembly Program & Counsel. Theo received his Bachelor of Arts degree in Politics from Ithaca College in Ithaca, N.Y.
