ImpactAlpha. Jan. 23 – Climate-driven floods, droughts and extreme weather around the world caused more than $268 billion in costs last year. Most vulnerable: smallholder farmers who lack access to affordable insurance.
Newe “is at the forefront of developing fully digitized weather and yield parametric products in Brazil, targeting small-scale farmers and people with low incomes in rural areas,” BlueOrchard’s Felix Hermes told ImpactAlpha.
Traditional insurance policies pay policyholders based on damages, which requires lengthy processes to document the claims. Parametric models pay out preset amounts when pre-defined metrics are triggered – for example, a certain amount of rainfall in a short time period or hurricane wind speeds. The triggers are verified by digital technology and sensors, saving money and speeding payments to farmers.
One of the earliest examples of parametric insurance, the the Caribbean Catastrophe Risk Insurance Facility, covers tropical cyclone, earthquake and excess rainfall events, with payments received within 14 days.
In addition to serving small, rural farmers, Newe is looking to bring parametric insurance to Brazil’s cities, which face risks of landslides and flash floods. “The opportunity for insurers in emerging markets lies with the unserved and underserved populations,” said Hermes. “Product innovation, technological capabilities, and digital channels are needed to succeed.”
While traditional insurers can evolve to meet the challenge, he added, “there is significant open space for new and innovative, tech-led business models.”
Switzerland-based BlueOrchard made the investment via its InsuResilience investment strategy, which aims to strengthen climate resilience in emerging markets. The initial $80 million private equity strategy was set up in 2017 in partnership with the German government and KfW bank. BlueOrchard is looking to raise up to $150 million for a follow-on fund.
Other innovative ventures it has invested in include Igloo, which uses real time data to help partners provide accessible insurance in South East Asia, and India-based Probus, which is expanding insurance coverage for low- and middle-income households.