Backed by the Natural Disaster Fund and in partnership with Bao Minh Insurance Corporation, the parametric product protects coffee growers affected by drought in the Southeast Asian country.
Willis, and Global Parametrics have announced the first ever payout of a parametric policy distributed to coffee farmers in Vietnam who suffered losses due to low rainfall during the 2024 coffee growing season.
In early 2024, Willis placed the parametric solution with Bao Minh, a Vietnamese insurer, protecting coffee farmers’ revenue against a lack of yield due to low rainfall during the critical flowering period.
The policy uses satellite data to measure rainfall levels in the country’s coffee-growing regions.
If the rainfall dips below predefined values, the insurance is triggered and farmers receive payouts without the need for lengthy claims processes or on-the-ground assessments.
Risk capacity to support the payouts was provided by the Natural Disaster Fund (NDF), a public-private partnership managed by Global Parametrics, a subsidiary of CelsiusPro Group focused on parametric protection against climate and natural disaster risks.
The NDF is funded by the UK government’s Foreign, Commonwealth and Development Office and Germany’s development bank KfW.
Vietnam is the world’s second largest coffee producer, with coffee playing an important role in the country’s export economy.
However, coffee production is highly sensitive to weather conditions, especially rainfall and temperature.
This risk transfer solution is marketed as providing a safety net for farmers, ensuring that they can continue their operations even in times of drought.
Laurent Bossolasco, sustainability manager at ECOM, one of the world’s largest family-owned coffee merchants, said: “It is vital for the survival of our coffee industry that the weather, market and agricultural risks borne by farmers are shared by market participants.
“Changing rainfall patterns, droughts and higher temperatures are part of the farming equation and parametric insurance can be a meaningful tool for coffee producers to adapt to climate change,” Bossolasco added.
The Coffee Climate Protection Insurance programme was developed by Willis and Global Parametrics is part of a wider “De-Risk South-East Asia” initiative in partnership with ECOM Agroindustrial, Bao Minh and the University of Southern Queensland in Australia.
Claire Wilkinson, managing director, alternative risk transfer solutions at Willis, said: “This programme supports the resilience of coffee farmers in Vietnam against the impacts of an increasingly volatile climate, giving them much-needed financial support and allowing them to recover quickly when adverse weather threatens their livelihoods.”
Angus Kirk, Chief Executive of Global Parametrics, said: “We are delighted that the parametric cover has effectively protected coffee farmers in Vietnam.
“Many of these farmers operate on a small scale with limited financial resources, which constrains their ability to cope with the impact of deviations in rainfall and temperature patterns on their crops. We look forward to continuing our work with our partners in Vietnam.”
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