Issues of using parametric insurance (PI) to Taiwan energy-saving performance contract (ESPC): A snapshot

Although the energy service company (ESCO) in Taiwan can apply traditional insurance to its energy-service performance contract (ESPC) business, can it apply parametric insurance (PI)? This is an issue worth studying. In the ESPC, there is a “guaranteed” energy-saving performance value by the ESCO. Since this energy-saving performance value is a “parameter” agreed upon by both the energy user and the ESCO, the ESCO should be liable for the “fixed amount compensation” for the “shortfall” loss due to failure to meet the “parameters”. The “fixed amount compensation” liability ESCO should bear is the object of parametric insurance. Therefore, this study attempted to explore the application issues related to using this parameter as a triggering factor for PI. How the “fixed amount compensation” should be calculated is not the subject of this study.