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May 07, 2023

Factbox: Parametric insurance policies help cushion climate impacts

[1/2] FILE PHOTO-An area is uncovered by the lowering of the water level in the

[1/2] FILE PHOTO-An area is uncovered by the lowering of the water level in the Magdalena river, the longest and most important river in Colombia, due to the lack of rain, in the city of Honda, January 14, 2016. Picture taken January 14, 2016. REUTERS/John Vizcaino

LONDON, May 19 (Reuters) - The damage wrought by climate change has spurred countries and communities across the developing world to look at using so-called 'parametric' insurance to help cushion the financial blow.

Guaranteeing a set payout once a specific event occurs, the cover is seen as a way to build resilience among impacted communities, yet the long-term viability of projects is often dependent on government efforts to adapt to worsening weather.

Below are a selection of projects launched in recent years which have already paid out.

Country: FIJI

Year launched: 2022

Project leader: U.N. (UNCDF, UNDP, UNU-EHS)

Insurer: Fiji Care Insurance Limited and Sun Insurance

Reinsurer: SCOR

Supported by: Governments of New Zealand, Australia, India, and Luxembourg

Perils insured: Cyclones - heavy wind and rainfall

Reach: 2,147 people

Payouts: In January and February 2023, the program paid out $110,000 FJD ($50,000 USD) to 559 smallholder farmers, fishermen, market vendors

Country: COLOMBIA

Year launched: 2018

Project leader: Blue Marble and Nespresso

Insurer: Seguros Bolivar

Reinsurer: Zurich Re, Trans Re, Aspen and ASSA

Supported by: The Government of Colombia

Perils insured: Excess rainfall and drought

Reach: 8,000 farmer households

Payouts: In 2022, the program paid out $3 million USD to 6,475 smallholder coffee farmers.

Country: ZIMBABWE

Year launched: 2016

Project leader: Blue Marble and World Food Programme, and agribusinesses

Insurer: Old Mutual in Zimbabwe

Reinsurer: Blue Marble owner companies

Supported by: World Food Programme and agribusinesses

Perils insured: Excess rainfall, drought and cyclones

Reach: 25,000 people in 2021/2022 season

Payouts: In 2021/22 season, the program paid out $55,822; $206,113 in payouts-to-date

Country: VANUATU

Year launched: 2022

Project leader: U.N. (UNCDF, UNDP, UNU-EHS)

Insurer: VanCare Insurance Limited

Supported by: Governments of New Zealand and Australia

Perils insured: Cyclone (wind only)

Reach: 122 people

Payouts: In March 2023, the program paid out VT25.56 million ($217,000 USD) to 84 people for Cyclones Kevin and Judy

COUNTRY: KENYA

Year Launched: 2022

Project leader: Lemonade Foundation

Reinsurer: Lemonde Foundation

Supported by: Lemonade Foundation

Perils Insured: Extreme weather during crop growing season

Reach: 7,000 farmers

Payouts: In February 2023, the program paid out $167,791 USD to 3,248 people for drought.

COUNTRY: GUATEMALA

Year Launched: 2021

Project leader: World Food Programme

Insurer: Aseguradora Rural

Supported by: Government of Canada, European Union, IFAD and WFP

Perils Insured: Excess rainfall and drought

Reach: 9,400 smallholder farmers as of 2022, of which 1,659 people made contribution of 10% of insurance premium

Payouts: In 2021, the program paid out Q 270 ($100 USD).

COUNTRY: INDIA

Year Launched: 2023

Project leader: Kerala Cooperative Milk Marketing Federation (MILMA)

Insurer: Agricultural Insurance Company of India Ltd

Supported by: MILMA

Perils Insured: Decline in milk production during extreme heat days

Reach: 14,500 cattle covered at a price of 100 INR ($1.22 USD) per animal.

Payouts: Shortly after launching in April 2023, the trigger was reached. The product will pay out more than the premiums collected at the end of March.

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Gloria Dickie reports on climate and environmental issues for Reuters. She is based in London. Her interests include biodiversity loss, Arctic science, the cryosphere, international climate diplomacy, climate change and public health, and human-wildlife conflict. She previously worked as a freelance environmental journalist for 7 years, writing for publications such as the New York Times, the Guardian, Scientific American, and Wired magazine. Dickie was a 2022 finalist for the Livingston Awards for Young Journalists in the international reporting category for her climate reporting from Svalbard. She is also the author of Eight Bears: Mythic Past and Imperiled Future (W.W. Norton, 2023).