Sihikindlust

Sihikindlust is a theoretical form of insurance concept used in risk management to transfer the financial risk associated with failing to achieve predefined targets. The term blends Estonian sihi (goal, target) with kindlustus (insurance). In principle, a sihikindlust policy would pay out when a project or business does not meet agreed objectives, such as revenue milestones, market-share goals, or project deadlines, addressing outcome-based risk rather than solely physical or property loss.

Policy design typically centers on defined triggers and coverage parameters. A policy would specify measurable shortfalls relative to targets, an agreed payout or range of payouts, and limits. Premiums are influenced by factors such as the probability of non-achievement, correlation with other risks, and the financial impact of the potential shortfall. Verification by independent auditors or data providers is often required to validate whether targets were missed.

Applications are most discussed in contexts like project financing, venture funding, performance-based contracts, and research or development programs where missing milestones carries substantial financial consequences beyond ordinary insurance coverage. The instrument is viewed as complementary to traditional protections rather than a replacement for them.

Relation to other instruments: sihikindlust is related to performance bonds, contingent revenue insurance, and contingency-based business interruption policies, but is distinguished by its emphasis on target outcomes rather than physical damage. It remains largely theoretical or experimental, with practical adoption limited by definitional complexity and pricing challenges.

Limitations and criticism typically focus on measurement ambiguity, potential moral hazard, and high complexity or cost, which have constrained widespread use.