The development of better data is helping to further enable parametric insurance, sources said.

“Certainly improved data helps. Data is absolutely essential,” said Karsten Berlage, New York-based managing director for Allianz Global Corporate & Specialty S.E.’s alternative risk transfer unit. “It used to be just weather stations on the ground. Now, increasingly, you use other forms of model data or satellite data.” 

Newer forms of data are being used in conjunction with one another, according to sources.

“I think it’s the combination of data,” said Kurt Cripps, London-based managing director of Aon P.L.C.’s innovation and solutions team. “Historically, we had ground-based data. Now it’s a combination of ground-based data, satellite data and data from new technology and connected devices, such as sensors utilized by retailers to measure customer footfall.”

“Data is improving all the time,” Mr. Cripps added. “In terms of satellite data, I think we’ll attain a granularity of 5 meters by 5 meters by 2021.”

Parametric insurance coverage is based on a data trigger, the data for which comes from a third party agreed upon by stakeholders.

“The coverage is index-exceedance-based and is triggered on the exceedance of that index, such as wind speed or water height,” said Duncan Ellis, U.S. property practice leader for Marsh L.L.C. in New York. There are several data providers, such as Property Claims Services Inc., “which can provide good, detailed third-party data, which can be used for the trigger index that will be accepted by the carrier.”

Indeed, data has become so important that it even constitutes a revenue stream for one player.

“For hurricanes, we have an exclusive data license to a network of purpose-built, hurricane-hardened anemometers,” said Evan Glassman, CEO of Fort Lauderdale, Florida-based New Paradigm Underwriters L.L.C.

The devices, which measure wind speed, are owned and operated by WeatherFlow Inc., a meteorological data company.

New Paradigm has exclusive license to the data from the anemometers and, in turn, licenses it to clients including insurers and reinsurers, Mr. Glassman said.