The Bermuda Monetary Authority plans to launch a public consultation later this year on a new framework for parametric insurance products, a move aimed at helping close the global protection gap and strengthen policyholder resilience amid rising climate and cyber-risks.

The initiative builds on Bermuda’s recognised Special Purpose Insurer structure, a cornerstone of the island’s insurance-linked securities market.

The BMA said the proposed framework will be designed to “meet the evolving needs of policyholders” as traditional indemnity insurance models face growing strain from natural catastrophes and emerging threats.

“As the nature, scale and frequency of natural catastrophe risks shift globally due to climate factors, the financial impact on policyholders and the gap from non-insured losses continue to grow,” the authority said in a press release. “This is further compounded by emerging risks beyond nat cat, such as cyber threats.”

Parametric insurance, which triggers payouts based on predefined parameters like wind speed or rainfall, can deliver faster claims processing and lessen loss uncertainty.

The BMA said a fit-for-purpose framework would support the growth of a strong parametric market, offering policyholders coverage “to bridge gaps left by traditional insurance” while providing quicker recovery after loss events.

The consultation paper on the new SPI framework for parametric products is expected to be issued in the fourth quarter of 2025.

Taijaun Talbot, assistant director of supervision at the BMA, told delegates at ILS Bermuda Convergence 2025 earlier this month that the regulator was in an “advanced stage” of developing the framework.

The new class, he said at the time, will be “fully collateralised and built on the foundations of the current SPI class”, with additional features such as “the use of swaps, derivatives and basis risk to enhance parametric covers”.

Globally, parametric is expected to surge more than 12 per cent over the next decade.

The new class, he said, is expected to draw investors seeking climate and weather-linked returns through these automatic triggers.

It will mark the first major addition to Bermuda’s insurance framework in several years.

The authority reaffirmed its commitment to ensuring that Bermuda’s regulatory environment “supports continued innovation and resilience in the island’s insurance sector”.