Emerging and Growth Markets | June 28, 2024

Uptick in climate-smart insurance for vulnerable farmers

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

Climate-related disasters caused an estimated $250 billion in damages worldwide last year. The increasing frequency of extreme weather events is hitting low-income and agriculture-dependent households in emerging markets disproportionately hard.

So-called parametric insurance speeds payouts by automatically paying policyholders when certain incident thresholds are triggered, such as cyclone strength or flood levels. Luxembourg-based IBISA designs and prices parametric products for insurers and other financial institutions that protect farmers and agrifood businesses in Africa and Asia against drought, typhoons, flooding, high heat and other weather incidents.

The insurance tech company this week raised $3 million in an early funding round backed by Acumen’s Resilient Agriculture Fund, or ARAF, along with Ankur Capital, Equator, and the Asian Development Bank.

Livelihood protection

Asia has experienced the highest total climate-related agricultural loss worldwide in the past 30 years; Africa has seen the greatest loss in terms of GDP. But access to affordable crop and livestock insurance is scarce.

One of IBISA’s policies provides heat stress protection for dairy farmers in India, which just weathered its longest heatwave on record. The policy is being expanded to Bangladesh. IBISA has also partnered with the Philippines’ second largest mutual insurer, Climbs Insurance, to provide farmers with coverage against excess rainfall and wind.

Parametric providers

Parametric insurance providers are few in number but growing. Policyholders gain protection without the hassle and wait involved with filing claims. Insurers benefit from predictability and risk mitigation in their portfolios, even as climate incidents increase.

Switzerland-based Pula, which provides crop protection to African farmers, raised $20 million this year to expand into livestock insurance. Brazil-based Newe covers low-income communities and smallholder farmers. Zambia-based Acre Africa designs parametric products for farmer cooperatives (listen to ImpactAlpha’s conversation with Acre Africa’s Niza Banda).

Insurance startups are testing the model in the US and Europe as well. FloodFlash in the UK and Floodbase in the US both provide coverage for flood victims.