An agreement under which an entity assuming risk (the "insurer")
agrees to pay the indemnitee (the "insured") an agreed amount upon
the occurrence of a specified event, such as an earthquake or hurricane of
specified intensity. The event, or "parameter," is often indicated by
an established and authoritative index for that type of event, such as the
Richter scale for earthquake intensity or the Saffir-Simpson scale for
hurricanes. For that reason, parametric coverage is also referred to as
"index-based insurance." Parameters can be defined by other objective
factors, such as the extent of physical damage, and are typically limited to
certain time periods and geographic areas. The parties may also develop
customized risk parameters based on wind speeds, storm surge, rainfall (or lack
thereof), and other factors, both natural and human-driven, alone or in
combination.