(Image credit: Shutterstock.)
Parametric InsurTech Skyline Partners (London) has announced that it has partnered with broker Howden (London) and global reinsurer Munich Re (Munich) to develop a parametric insurance solution designed to protect farmers in Jamaica from extreme weather events.
Given that farming is the main the source of income for about 18 percent of the Jamaican population, adverse weather events can have an extremely detrimental impact on livelihoods, a Skyline statement on the initiative notes. The Caribbean has low insurance penetration rates and is experiencing increasingly frequent and severe weather events, which tests the region’s financial systems, the statement stresses.
In an effort to alleviate the issue, Howden, Skyline and Munich Re collaborated to develop a new parametric product that protects the Jamaican Co-operative Credit Union League (JCCUL) against non-repayment of micro-loans from farmers in the event of extreme weather.
JCCUL is used for loans by a 100,000 smallholder farmers in the country and is used to pay for essentials, such as seeds, day-old chicks, and farming equipment, according to Skyline. However, adverse weather can result in farmers’ inability to repay their loans, which in turn threatens JCCUL’s ability to continue to offer vital financial support to its members.
The parametric insurance solution developed by the three partnering organizations will replace lost funds as a result of farmers defaulting on their loans in the event of an extreme hurricane.
“This product demonstrates the potential for parametric insurance to take on risk challenges that don’t lend themselves to traditional insurance,” comments Laurent Sabatié, Co-Founder and Executive Director, Skyline. “We look forward to expanding this concept as we work with financial institutions to increase resilience against climate change and natural disasters by combining insurance innovation with technology.”
Smoothing-Out Volatility and Providing Confidence
If farmers can’t afford to repay their loans, the JCCUL’s ability to remain operational itself put at risk, notes Robin Levy, Group CEO, JCCUL. “Without loans from credit unions, many farmers in Jamaica simply would not be able to afford to operate,” he says. “This coverage helps to smooth out that volatility and provides them with the confidence to continue to deliver the essential financial support that so many people rely upon to make a living.”
“Globally, we’re seeing an exponential increase in weather-related events versus other non-climate perils,” observes David Flandro, Head of Analytics, Howden. “Storms in the Caribbean are becoming more powerful, with increased rainfall and higher storm surge, and Jamaica has one of the highest physical exposures to tropical cyclones in the region.”
In order to support the growth of the new proof-of-concept solution, which has the potential to increase the resilience of communities most exposed to extreme weather events, Howden has contributed to the premium for the first year, Skyline reports. The company characterizes the project as part of a broader agenda to unlock private capital, including donations from individuals, corporates, and foundations, to help fund solutions for those with limited access to traditional insurance products.
Blink Parametric Partners with baoba on Travel Insurance Solutions