Regulatory Challenges in Parametric Insurance: A Cross-Jurisdictional Study of Emerging Markets

Abstract

Background: Parametric insurance, an innovative approach to risk management, is gaining traction in emerging markets due to its efficiency in claims processing and disaster response. However, the legal and regulatory frameworks governing parametric insurance are still evolving, particularly in smaller jurisdictions with limited resources.

Objective: This research examines the regulatory challenges faced by parametric insurance providers in emerging markets. It focuses on identifying gaps in existing legal frameworks and offers insights into how these can be addressed to enhance consumer protection and operational efficiency.

Methodology: The study adopts a cross-jurisdictional research design, analyzing the legal and regulatory approaches to parametric insurance in New Zealand, Fiji, and Sri Lanka. Data was collected through interviews with policymakers, industry professionals, and legal experts, complemented by an analysis of regulatory documents, case law, and industry reports from 2015 to 2024. Comparative analysis was employed to evaluate the similarities and differences across jurisdictions.

Findings: The findings indicate that while parametric insurance has potential for addressing disaster risks efficiently, regulatory gaps persist in ensuring data transparency, dispute resolution, and fraud prevention. New Zealand’s advanced regulatory mechanisms offer valuable lessons for smaller countries like Fiji and Sri Lanka, which face challenges in resource allocation and enforcement. Recommendations include the establishment of regional regulatory alliances and the adoption of standardized policies to enhance accountability and consumer trust.