Verisk’s Property Claim Services (PCS) business says the COVID-19 outbreak should be approached as an opportunity to develop parametric insurance arrangements for future pandemics.

PCS says creativity would be key for a 2020 proof of concept as emerging risks and new markets can’t be addressed “while clinging to past operating approaches”.

“The risk-transfer techniques our industry pioneers today could be the first step future generations use a hundred or more years from now,” it says in a white paper published on the Risk and Insurance Management Society (RIMS) website.

The US-based firm, which investigates and collects data on disasters, proposes a parametric industry loss warranty (ILW), where an independent third party’s measurement of cases or fatalities could be used as a trigger for payment arrangements that tap capital markets.

PCS says issues to address include the varying figures and inconsistences in data released by groups such as the World Health Organisation and Centres for Disease Control and Prevention.

“Frankly, per their missions, it’s not that important that the absolute best numbers make it to the web every day,” PCS says. “They can always update the next day.

“However, the implications for transactions referencing one of these organisations could be significant.”

The paper suggests it should be possible to develop “reasonably robust and reliable” triggers taking into account the challenges of using “informal reporting agents” that are not actually parties to the insurance transaction.

“The most important step is to understand what data is actually reported by different sources, how they operate and what difficulties could arise through the course of normal reporting.”