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Riskwolf Parametric Insurance Glossary

This glossary defines key terms used in parametric insurance and the Riskwolf platform. Definitions follow industry best practices and standards from ACORD, NAIC, and leading reinsurers.

Core Insurance Terms

Coverage

A parametric coverage defines the exact specification of a covered risk event and corresponding payouts. It includes:

  • Risk parameters and trigger definitions
  • Payout structure and calculation methods
  • Geographic scope and monitoring targets
  • Risk period and temporal boundaries

Deductible

The proportion of risk retained by the policyholder. The amount by which each claim payment is reduced. For example, a 10% deductible means a claim of $1,000 would pay out $900, with the policyholder bearing the remaining $100.

Expected Loss

The statistical mean loss for a given period, calculated as the sum of probabilities for each loss level multiplied by respective loss costs. Used in technical pricing calculations.

Exposure

The state of being subject to the possibility of loss and the measure of potential future loss resulting from an event. In parametric insurance, exposure is quantified through monitoring targets and risk parameters.

Hazard

A factor or activity that may cause or exacerbate a loss. Hazards increase the probability of a peril occurring and are key considerations in coverage design.

Index

A quantitative measure derived from observable data that serves as the basis for parametric triggers. See Weather Indices and Common Indices for detailed specifications.

Insurance

A means of protection against financial loss through risk management, used to hedge against contingent or uncertain losses.

Parametric Insurance

"A type of insurance contract that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses in a traditional indemnity policy." (NAIC Definition)

Peril

A specific event that may cause loss or damage, such as drought, excessive rainfall, temperature extremes, or natural disasters.

Policy

A written contract of insurance that defines coverage terms, conditions, and obligations between the insurer and policyholder.

Premium

The amount paid by the insured to the insurer for coverage. Includes risk premium plus expenses, profit margins, and other factors.

Risk

Uncertainty arising from the possible occurrence of specified events that could result in financial loss.

Sum Insured

"The maximum amount payable in the event of a valid claim." (ACORD Definition) In parametric terms, it represents the maximum payout on an insurance contract or individual coverage.

Term Sheet

A document that outlines the key terms and conditions of a proposed coverage, including risk parameters, triggers, payouts, and pricing structure.

Trigger

Also: Strike

A threshold value of an index that, when breached, initiates claim payouts. Triggers are fundamental parameters in parametric coverage design.

Vulnerability

The susceptibility of exposed elements to suffer damage or be affected by a hazard event.

Platform-Specific Terms

API Integration

Programmatic access to Riskwolf platform functionality through RESTful APIs. See API Integration Guide for implementation details.

Coverage Designer

Riskwolf's platform tool for designing and configuring parametric coverages, including risk parameters, triggers, and payout structures.

Data Provider

An organization that observes and provides data for event tracking and index calculations. See Data Sources for available providers.

Event

An incident of interest in an insurance context that can be documented via date/time and may or may not result in a claim.

Monitoring Target

A specific location, asset, or entity being observed by data providers for parametric insurance purposes. Defines the geographic or logical scope of coverage.

Program

A collection of related coverages and policies managed as a portfolio. Programs can be launched and monitored through the Riskwolf platform.

Quote

A statement of premium and coverage terms issued to a potential policyholder. Quotes can be generated through API endpoints or the platform interface.

Technical Terms

Aggregate Exceedance Probability

Probability that the accumulated financial loss from one or more events in a given year exceeds a certain amount.

Event Definition

Specifies the logical relationship between measures and thresholds that qualify as a covered event in parametric insurance.

Exit

The upper-bound parameter in payout structures where payouts are capped, preventing unlimited exposure.

Inception Date

The date and time when a policy becomes effective and coverage begins.

Loss Exceedance Curve (LEC)

Visual representation of probabilities that a loss will exceed certain amounts over a given time horizon.

Payout

The benefit (monetary or service) transferred to the policyholder based on parametric triggers and payout structures.

Payout Structure

Defines the exact calculation methodology using triggers, exits, payouts, and limits to determine parametric loss amounts.

Probable Maximum Loss (PML)

The maximum loss an insurer would expect to incur on a policy, typically measured using the 99th or 99.5th percentile of loss distribution.

Risk Period

The timeframe for which coverage applies, defining when events will be monitored and covered under the contract.

Risk Premium

Also: Pure Premium, Technical Price

The expected loss cost of an insurance policy without expenses, investment income, or other factors.

Data and Analytics Terms

Anomaly Threshold

A mathematical function used to classify measure values as anomalies in time series data (significantly high or low compared to historical values).

Data Catalog

Comprehensive view of all available measures and data sources. See Data Sources for current catalog.

Index Calculation

The mathematical process of deriving quantitative measures from raw observational data for use in parametric triggers.

Measure

Any observed data point collected and stored by data providers from event sources.

Monte Carlo Simulation

A mathematical technique used to estimate possible outcomes of uncertain events through repeated random sampling.

Moving Average

A succession of averages derived from successive segments of a data series, used in trend analysis and smoothing.

Probability Distribution

A mathematical function that describes the likelihood of different outcomes in a statistical experiment.

Return Period

The average time interval between occurrences of events of a given magnitude, expressed in years (e.g., a 1% probability event has a 100-year return period).

Standard Deviation

A statistic measuring the dispersion of a dataset relative to its mean, indicating variability in the data.

Claims and Settlement Terms

Automated Claims

A key feature of parametric insurance where claims are automatically calculated and processed based on objective data without policyholder intimation.

Claim

The amount of compensation requested or automatically calculated for a policyholder with respect to a covered loss event.

Claim Report

Periodic documentation listing all recorded claims for a specified time period.

Franchise

Minimum loss amount that must occur before the insurer becomes liable to pay claims.

Notice of Loss

Notification to liable parties about a parametric loss event and resulting claims payable on affected policies.

Parametric Loss

Individual loss amount calculated based on payout structures for specific loss events, determined objectively from index values.

Proof of Loss Statement

A formal document stating the compensation amount requested from the insurance carrier (less relevant in automated parametric claims).

Business Context Terms

Business Partner

A commercial entity interacting with the Riskwolf platform, including risk carriers, distributors, and data providers.

Distributor

A business partner that quotes and distributes insurance policies to potential policyholders.

Exclusions

Defined circumstances under which insurance coverage is void or does not apply.

Expiry Date

The date when coverage ends. After this date, the insured is no longer covered unless the policy is renewed.

Insured

The person or entity covered by an insurance policy.

Policy Period

The duration for which a policy remains in effect. Loss events occurring within this period are considered for parametric payouts.

Policyholder

The person or entity in whose name an insurance policy is held.

Risk Carrier

A business partner that underwrites insurance risk and is ultimately liable for paying compensation in loss events.

This glossary is regularly updated to reflect platform enhancements and industry developments. For technical support or clarification on any terms, contact your Riskwolf representative.