Category: Parametric insurance · Reviewed by Chrissie Anderson, Client Executive · Last reviewed 2026-06-10
Parametric heat insurance is a class of parametric weather cover under which the trigger is the occurrence of high-temperature days or the cumulative exceedance of a temperature threshold over a defined period. The class has grown materially since the July 2022 European heat dome and the 2023 and 2024 European heatwaves, with London market MGAs writing covers for energy retailers, agricultural producers, outdoor workforces (principally in the United States), event organisers and, increasingly, municipal climate-adaptation programmes.
Category: Parametric insurance Also known as: Parametric heat cover, heat-day insurance, extreme heat parametric Established / Coined: Modern commercial form from circa 2018; growth from 2022 European heat dome Related concepts: Parametric weather insurance, Parametric insurance, Basis risk parametric
A parametric heat insurance contract typically uses one of three trigger architectures: a “heat day” count trigger (the number of days within a defined period on which maximum temperature at a defined station exceeds a threshold, e.g. 30 °C), a cumulative cooling-degree-day index, or a peak-temperature trigger (any day of more than X °C pays). The reference station is typically a Met Office (UK) or national meteorological service station; for poorly served sites, ECMWF ERA5 reanalysis or Copernicus C3S products are used.
In the United States, parametric extreme-heat covers have been written for outdoor workers in California, Arizona and Texas — notably by Swiss Re and Munich Re, in partnership with Adrienne Arsht-Rockefeller Foundation Resilience Center — as employer-paid covers contingent on heat-stress days exceeding occupational thresholds.
The contract is insurance for UK regulatory purposes where the St Christopher test ([1974] 1 WLR 99) is met and insurable interest under Marine Insurance Act 1906 s.4 is present — for example, an energy retailer’s exposure to falling consumption during very hot weather, or a brewer’s exposure to supply disruption. Where the trigger is contingent on the policyholder’s economic exposure, the EIOPA Discussion Paper on parametric insurance (June 2023) confirms that such products are insurance for Solvency II purposes.
For UK retail sales, ICOBS 6 information requirements, the Consumer Duty (FCA PS22/9) and PROD 4 product governance apply. The FCA has previously stated in its 2023 Climate Adaptation Report that parametric heat may be a fair-value product where basis risk is clearly disclosed.
A UK energy retailer purchases a cooling-degree-day index cover from a London market MGA: cumulative cooling-degree-days (CDD) above 20 °C at five Met Office reference stations across England between 1 June and 31 August. The strike is set at 100 CDD; payment is GBP 50,000 per CDD up to GBP 5 million. Settlement is within 21 days of the index period closing, against published Met Office MIDAS data.
For US occupational heat covers, the trigger is the number of days on which the wet-bulb globe temperature (WBGT) at the relevant National Weather Service station exceeds 30 °C; payment is made to workers via the employer (or, in the Arsht-Rock pilot in Seville, by the city government).
Growth from 2022 has been driven by physical climate-attribution work by World Weather Attribution and the IPCC AR6 WG1 (2021), which has informed underwriting model selection. The Lloyd’s Lab cohort 11 (2024) included a parametric heat insurance proposition. UK municipal interest, particularly from London local authorities exposed to heat-related social-care costs, has been documented in the Climate Change Committee’s 2023 Progress Report.
A Greater London local authority, in conjunction with its insurance broker, structures a parametric heat policy via a Lloyd’s coverholder. The trigger is the number of days at the London City Airport Met Office station above 32 °C between June and August. A payout of GBP 250,000 is triggered when the count reaches five, with a maximum of GBP 1.5 million. The contract proceeds are earmarked for emergency cooling-centre activation, with the authority’s procurement and audit functions involved in the structuring under public-procurement rules.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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