Factbox-Parametric Insurance Policies Help Cushion Climate Impacts

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.