Broking group Howden, global reinsurance firm Munich Re and UK insurtech Skyline Partners have teamed up to develop a parametric hurricane insurance product for Jamaican farmers.
The parametric insurance is designed to stabilise Jamaica’s financial system for its farming community, which it is said is coming under significant stress due to the increased frequency and severity of natural disasters.
The parametric insurance protects the Jamaican Co-operative Credit Union League (JCCUL) against non-repayment of micro-loans from farmers after severe hurricanes. The Jamaican Co-operative Credit Union League provides loans to around 100,000 smallholder farmers.
When natural disasters strike, it can put farmers at-risk of not making their loan repayments, so the insurance is designed to replace funds lost after farmers default on loans, in the event of an extreme hurricane breaching the parametric trigger.
It’s assumed Munich Re is putting its reinsurance capital behind this parametric risk transfer arrangement, while Skyline’s technology is used to provide the coverage in an efficient manner.
Robin Levy, Group CEO for JCCUL commented, “If farmers can’t afford to repay their loans, our ability to remain operational is put at risk. Without loans from credit unions, many farmers in Jamaica simply would not be able to afford to operate. This coverage helps to smooth out that volatility and provides them the confidence to continue to deliver the essential financial support that so many people rely upon to make a living.”
David Flandro, Head of Analytics, Howden, added, “Globally, we’re seeing an exponential increase in weather-related events versus other non-climate perils. 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.”
Charlie Langdale, Head of Climate Risk and Resilience, Howden, stated, “Climate change is causing huge changes in the type and scale of risks, especially for developing nations that are both facing the most severe effects, and are least protected by insurance.”
Laurent Sabatié and Gethin Jones, Co-Founders and Executive Directors, Skyline, also said, “This product demonstrates the potential for parametric insurance to take on risk challenges that don’t lend themselves to traditional insurance cover. 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.”
Langdale concluded, “We’re starting to see insurance being used in scenarios that it never would have been 5 years ago. By asking the right questions about the risks that people, organisations and nations are facing today, and pushing the boundaries of insurability, the insurance industry has the potential to truly face up to the challenges of climate change and protect those who are most exposed.”