Read Global Parametrics’ Impact and ESG Manager, Wendy Smith, sharing her reflections on the success and opportunity promised by one of our most impactful and exciting programmes – the CLIMBS Weather Protect Insurance product.
In August, I visited the Philippines to meet with our in-country partner, CLIMBS Life and General Insurance Cooperative, to join them on two of their product roadshows in Davao City and Cebu City. It was a chance to share with CLIMBS’ customer cooperatives the value of our Weather Protect Insurance product and the ways it could benefit their farmer members and communities. Farmers in the Philippines have limited capacity to protect themselves against extreme weather events, due to precarious incomes from variable yields. Indeed, financial institutions can perceive the agricultural sector to be too risky, restricting farmers to access to credit. The CLIMBS Weather Protect Insurance programme provides is an effective alternative which protects the Philippines’ agricultural sector against the increased risk of climate change related events.
This year, the roadshows were a space to share evidence of the success of the Weather Protect Insurance product in its initial pilot. In 2021, the pilot, funded by our Technical Assistance Facility with capacity from the NDF partnership, provided protection against the increased risks posed by heavy rainfall events for 14 cooperatives across 15 provinces protecting 3,600 farmers. The product triggered three times in the year, following Typhoons Rai and Megi/Agaton, resulting in pay-outs for 8 of the 14 cooperatives, across six affected provinces.
However, the 2021 pilot did more than demonstrate the success of the product. Following learning events, in collaboration with farmers and cooperative members, consortium partners, including GP, CLIMBS and IBISA Network and CIAT, identified how the product could be improved to provide the best protection. The 2022 product incorporates those upgrades and offers cooperatives across CLIMBS’ network with a purposefully developed mechanism for disaster risk financing. Primarily, a wind-speed index was added alongside excessive rainfall, to reflect the reality of disruption faced by farmers during these extreme weather events. It also includes an upgrade of the online policy monitoring platform system, developed by IBISA, to include mobile compatibility for greater accessibility, as well as ensuring the agro-advisory learning modules developed and provided by CIAT address farmers most pressing concerns for climate change adaptation.
Once I had left the Philippines, the reality of the risk facing people across the Philippines became even clearer as Tropical Cyclone Noru made landfall on 24th September. This tropical cyclone, documented as one of the fastest rapid intensifications ever recorded in the Pacific Basin, caused widespread devastation for communities and businesses. The Philippines is recognised as one of the most vulnerable countries to climate change in the world. Tropical cyclones are a key risk, with the country already experiencing up to 20 per year – a figure set to increase both in quantity and intensity due to the rapidly changing climate. This will present challenges for those whose livelihoods and assets are so closely tied to weather that is increasingly becoming more unpredictable and destructive.
The new, and improved, Weather Protect Insurance product has now been developed and scaled to cover 105 cooperatives, representing 100,000 farmers across 42 provinces. It is evidence of the demand and need for innovative disaster financing solutions in climate vulnerable countries, especially targeting those communities and sectors that represent low-income groups where the need to build resilience for sustainable development is paramount.
By Wendy Smith
Earlier this month, our Impact and ESG Manager, Wendy Smith, spoke at the 13th ASEAN Insurance Congress, themed “Building Resilience for a Changing World”. The Congress was hosted in Kuala Lumpur by the ASEAN Insurance Council and The Malaysian Insurance Institute.
In her talk, Wendy explains how parametric insurance provides an active management solution to nat cat and extreme weather risk. Climate change and population growth has increased vulnerability to these hazardous events. This results in significant economic losses, especially in geographies which are traditionally underserved by formal risk transfer.
Wendy also discusses the exponential growth of the parametric industry since 2013. Global Parametrics is at the forefront of this progress, providing global parametric protection to enable business continuity in the aftermath of nat cat and extreme weather events.
Watch Wendy’s exciting talk at the ASEAN Insurance Congress below:
Last month I was in Singapore, a chance to reconnect with long-standing and new partners, who in many instances I’d never met in person due to restrictions over the last two years. This trip was an opportunity to understand more about clients’ needs and to promote Global Parametrics’ appetite to write risk in the region.
It had been 20 years since I was last in Singapore and arriving in the city I was astounded. Traditional old buildings stood alongside soaring modern skyscrapers, yet nothing looked out of place. It is a city that thrives on innovation and new thinking, whilst at the same time being unashamedly conservative – a metaphor for the risk transfer industry perhaps?
Singapore is known as the gateway to Asia. A region especially impacted by extreme weather and natural hazards. Tropical Cyclones, Earthquakes, Volcanos and Tsunamis are regular occurrences, whilst climate change is increasing the frequency and severity of drought, rainfall and flood. It can be all too easy to focus on these events in isolation and create distance from the reality of their devastation. Being in the places, with the people, that these events put at risk is always a stark reminder of the human, social and economic impact of our changing climate and natural hazards.
Across Asia, the climate emergency is a present reality creating increased risk. According to the Global Climate Risk Index, Japan and the Philippines are the most impacted countries by climate change today, making them a clear priority for disaster risk resilience and reduction. But just as diverse are the cultures within and across the countries that make up the region, so too are their vulnerabilities to extreme weather and natural hazards.
Home not only to some of the world’s highest peaks, remote small islands and low-lying plains, Asia is also home to some of the world’s most densely populated urban areas as well as vast rural communities, often dependent on land and local ecosystems for their livelihoods and way of life. While it has witnessed the rapid industrialisation and development of some of the world’s most important economies, the reality of chronic poverty and underdevelopment remains true for many. This creates diverse risk and socio-economic impacts of extreme weather and natural hazards, but for all, financial resilience is critical.
This is where parametric products have a key role to play.
Global Parametrics has always been keenly focused on how our products and solutions can be deployed to meet these challenges and demands in Asia. In the Philippines, we are an investor in their World Bank issued Catastrophe Bond, we support Climbs Insurance enabling them to offer their ‘Weather Protect’ product to agricultural co-ops, and we have been running the B-Ready, forecast tropical cyclone aid program with Oxfam Philippines since 2018. In India our work includes supporting AIC’s parametric crop insurance program for the state of Bengal and we have risk across the region in countries such as Vietnam, Cambodia, Myanmar, Sri Lanka and Nepal.
Typically, re/insurers, and therefore brokers and the entire risk supply chain have been focused on offering solutions for Natural Catastrophe risk, such as Earthquake and Tropical cyclone, or government crop programs. But there is so much more risk out there, and more and more clients are finding these are excluded from or prohibitively priced in their traditional indemnity coverages. Parametrics is a way to look at some of this risk differently, managed in a more pro-active way and therefore mitigated.
On the flight back I reflected on what I had learnt in Singapore through discussions with our partners. Climate change is here, it is being felt, and solutions need to be focused on local businesses, local challenges and local people. We need to do more, faster, to build financial resilience in these uncertain times.
By Toby Behrmann
To celebrate the 5-year renewal of our flagship programme with VisionFund, the African, Asian and Americas Resilience in Disaster Insurance Scheme (ARDIS), we sat down with Kevin Huttly, ARDIS Director, to discuss the scheme, reflect on its successes and outline future plans.
It’s the five-year renewal of the ARDIS, could you explain the scheme and what it does?
ARDIS covers VisionFund’s microfinance institutions (MFIs) across 27 countries. Established in 2018, ARDIS is a financial tool for promoting recovery lending and active risk management for our network of MFIs. It provides access to capital via climate indexed derivative and contingent credit contracts when a disaster occurs. VisionFund uses the ARDIS programme to support recovery lending to its client base, many of whom are women in the agricultural sector, where loans typically range from $70 to $300, in the event of a natural hazard or extreme weather, including earthquakes, tropical cyclones, droughts and excess rain. ARDIS buys the derivative contract from the Natural Disaster Fund, managed by the Global Parametrics team. Global Parametrics creates the parametric indices which back the risk transfer contract for ARDIS; if they are triggered during specific events there are payouts which are then distributed by ARDIS back into the institutions as capital.
How do you think that the ARDIS programme is innovative and unique at helping protect against the impact of natural hazards and extreme weather?
ARDIS has been referred to as the world’s largest non-governmental climate ‘insurance’ programme. However, the scheme is innovative and unique because it does not function like traditional indemnity insurance. Instead, ARDIS is a blended scheme that uses different financial tools to help people rebuild after a natural hazard or extreme weather event. This allows MFIs to continue lending to them, when often credit is scarce following the uncertainty of the event’s impact and thereby, helping them to get back on their feet faster. It would be very difficult to pre-emptively assess what a farmer’s exposure is to these risks, so instead, Global Parametrics creates indices for perils, which pay out when triggered by an event, eliminating assessment of loss time and costs and permitting immediate access to payouts and benefits. These indices use global, publicly available datasets, allowing for an objective and transparent measurement of risk.
How far reaching is the ARDIS programme?
Originally, when the scheme was first established in 2018, it covered 6 countries in Africa and Asia. This has grown over time with numerous successful renewals, now operating globally in all 27 of VisionFund’s countries as of 2022, 11 in Africa, 7 in Latin America, 6 in Asia and 3 in Middle Eastern and Eastern European countries.
Growth in geographic reach 2018-2022
What impact has the ARDIS programme had over the last five years?
The ARDIS scheme has made a significant impact in locations such as Honduras, the Philippines, Myanmar, Eastern and Southern Africa, where the scheme operates for a range of perils including flood, drought, earthquake, and tropical cyclone windstorm. We have seen evidence that most of the loans, in these places, have enabled people to get back on their feet, mitigating negative coping mechanisms, and being able to pay back their old and new loans in the wake of a natural hazard or extreme weather event.
In the last 3 years, the Covid-19 pandemic has been a significant challenge for VisionFund overshadowing ARDIS and its impact. At times many of our institutions have been restricted in their loan making abilities by lockdowns and have not been able to go into the field. This has meant restriction on recovery lending even when there has been both capital payouts and credit entitlements. However, more lately, institutions have been able to go back into the markets and start lending again, using recovery loans. Overall, I think Covid-19 has helped the understanding within our organisation of the value of recovery lending and of insuring against disaster. At an MFI level, our institutions now understand recovery lending a lot better, as they have been performing it for Covid-19.
In terms of pay-outs, ARDIS has made 5 payments under the derivatives for flood, drought and tropical cyclone windstorm.
What is the future of the ARDIS programme, where else do you hope to make an impact with the scheme?
We are looking to build on the successes of ARDIS, to forge a new partnership with Global Parametrics going forward. We want to create ‘ARDIS 2.0’ which would act as a consultant advisor to other microfinance organisations, assessing their risk to natural perils and advising on the best programme structure and how to efficiently access products based on their risk. The partnership would not only focus on the insurance aspects, but also endeavour to educate people on recovery lending, how it works and its benefits, aiming to change mind-sets about how to best to protect vulnerable individuals and communities from natural hazard disasters.
For more information on ARDIS and its impact, please go to the VisionFund website: https://www.visionfund.org/our-focus/insurance/ardis
Obbe showcased our recent work developing a parametric solution for urban excess heat, and the role it can play in adaptation for climate vulnerable regions.
Obbe outlined a case study for our implementation of the urban excess heat product in Ahmedabad, Northern India, with the women’s network, the Mahila Housing Trust.
Watch the full presentation below:
Global Parametrics’ mission is to catalyse markets for disaster risk protection and foster impact at scale.
Through our NDF Partnership, a blend of public and private capital, we combat extreme weather and natural hazard risk.
We are proud to document our journey to reach this impact, with the release of the first edition of the GP Quarterly Impact Briefer.
In this edition, we explore updates from Q1 2022, including:
- The release of the 2021 impact figures
- Announcing the B-Ready website, and our feature in the InsuResilience Global Partnership Annual Report
- Welcoming two new hires, Juan Pablo Sainz and Isabelle De Viggiani, to the GP team.
See below for the full report
Global Parametrics has been ranked no. 1 in Insurtech Insights’ and Sønr’s Future50 Europe- the industry’s definitive ranking of early-stage insurtech startups shaping the risk transfer landscape in Europe.
This award is the result of months of research, with input and critical analysis from some of the most experienced and influential names in the industry. Global Parametrics was selected amongst thousands of contenders for the top spot.
Produced by Insurtech Insights and Sønr Global, a leading market intelligence platform for the insurance sector, thousands of organisations were whittled down to a shortlist of over 300 before the final Future50 were selected by a panel of over 20 C-level judges. Judges hailed from some of the most highly regarded insurance companies worldwide.
Insurtech Insights bases their rating system on The Sønr Index which evaluates millions of data points across the following criteria:
- People: The key people across the business, taking in factors such as where they have studied, their past involvement with startups or notable companies, their known network, and whether they are considered experts in their field.
- Product: Including the core tech stack of the business, patents they have registered, the customer problem they have overcome and any exceptional tech or experience they have created.
- Performance: Growth metrics such as downloads, partnership, investments and traction. And other attributes including financials, market sizing and performance traction to date.
We are honoured for this recognition, which validates both our work and our mandate in delivering solutions to mitigate risk to climate and extreme weather.
See us featured in the full Future50 here:
While GP’s efforts to close the disaster protection gap have largely focused where the need is most profound in low- and middle-income economies, vast opportunities also exist to bring some of our lessons learned to vulnerable communities in higher income countries. This is precisely our motivation for supporting the Wharton Risk Center and the New York City Mayor’s Office of Climate Resilience alongside Guy Carpenter in the project: Promoting the Post-Flood Financial Resiliency of Low and Moderate Income Households.
The project recently received Civic Innovation Challenge award from National Science Foundation (NSF)/ U.S. Department of Homeland Security. The objective is to increase the financial resilience of low and moderate-income households in New York City to escalating flood risk through the use of inclusive insurance and innovative parametric solutions.
GP has been a pioneer integrating parametric solutions into the financial sector in low- and middle-income countries. In our flagship transaction with VisionFund International, we designed a disaster risk financing programme that blends the use of contingent credit and parametric risk transfer. This solution aims to help VisionFund’s microfinance institutions (MFIs) stabilize their balance sheets and access emergency liquidity after a disaster in order to help their borrowers recover more quickly. When disasters hit, lenders typically pull back liquidity, which makes recovery more challenging for the communities they serve. In contrast, the VisionFund initiative promotes quick, countercyclical financing to MFIs and their borrowers to speed up recovery. Now in its fourth year of operations, this programme includes tailored solutions for four different perils and for MFIs in 28 countries across Africa, Asia, and Latin America.
More recently, GP launched the Climate Resilience Enhanced Debt (CRED) product alongside Enabling Qapital, which embeds emergency liquidity and balance sheet support into a traditional wholesale loan product for MFIs. The first CRED transaction provides flood and drought protection to Chamroeun’s portfolio of agriculture loans in Cambodia.
As part of this new effort in New York City, GP will be helping to explore ways to work with local Community Development Financial Institutions (CDFIs) to incorporate similar parametric solutions as those deployed alongside VisionFund and Enabling Qapital. CDFIs represent a key lifeline to low and moderate-income households and finding ways to help these institutions promote faster recovery within the communities they serve can go a long towards building resilience and closing the disaster protection gap.
Read more about the programme here: https://riskcenter.wharton.upenn.edu/civicinnovations/
Global Parametrics (GP) and Germany’s KfW, one of the world’s leading promotional banks, today announced the first use of the NDF Technical Assistance Facility, a € 3 million grant from the German Federal Ministry for Economic Cooperation and Development (BMZ) designed to facilitate high impact and scalable risk transfer with capacity from the Natural Disaster Fund (NDF) and partners.
The Technical Assistance Facility (TAF) will act as a complement to the NDF – with the objective to mitigate start-up challenges which often occur when designing parametric risk transfer solutions for clients with developmental impact, including the high investment costs of product development, institutional education and distribution in fledging markets. The TAF will also provide funding for research and development activities to create an innovative product offering where market demand has been identified.
Through initial catalytic investment from the TAF, solutions will grow and scale, serving to deepen the risk transfer market in developing and emerging economies. This will contribute to the NDF’s target of indirect protection to between 66 – 105 million poor and vulnerable people under the InsuResilience Global Partnership by 2025.
The first programme to harness the TAF, in partnership with risk modelers ERN and Ingeniar Ltd, will create an offering for landslide risk in the city of Manizales, Colombia. The funding will build a unique rainfall-based landslide model, harnessing rainfall data within Manizales’ network, including historical records and statistics from local stations. Global Parametrics will structure a parametric risk transfer product based on the final index. The risk transfer capacity for this solution is anticipated to come from the NDF and international reinsurance and capital markets.
The parametric programme will provide another layer of protection alongside pre-existing indemnity policies to assist in immediate recovery efforts in the aftermath of a landslide event in Manizales. This disaster management mechanism is anticipated to cover over 260,000 residents in the city. It is envisioned that the product will be able to scale up into a wider offering, to catalyse future market activity for similar solutions in other geographies.
Stefan W. Hirche, Principal Portfolio Manager of KfW, said “With our support of the Natural Disaster Fund, the German government and we at KfW are proud to enable our partner countries to protect their citizens better against climate risks.”
Hector Ibarra, CEO of Global Parametrics stated, “The Technical Assistance Facility is a key instrument to promote innovation in resilience to natural hazards and extreme weather. We are pleased to partner with ERN and Ingeniar to develop this vital protection against landslide risk.”
Mario Ordaz, President of the Board of ERN stated, “The development of a parametric landslide product for Manizales, the first of its kind in Colombia and Latin America, will improve the disaster financing planning at city level, allowing coverage for a recurrent peril.”
Alexa Morales, Director of the Disaster Risk Management Unit of Manizales acknowledged, “We want to consolidate an effective risk reduction and adaptation strategy to allow us anticipate disasters using territorial planning and financial protection strategies, besides responding to them efficiently with the aim of making the city more sustainable, resilient and competitive.”
Omar D. Cardona, CEO of Ingeniar Ltd. said, “Having detailed inventories of landslides by the City and Corpocaldas, besides records of previous rains for each case, together with a real-time warning system and hazard models developed by the National University of Colombia, makes Manizales an ideal natural laboratory.”
About Global Parametrics
Rethinking risk to build more inclusive resilience: Extreme weather events and natural hazards are being intensified by climate change, increasing the frequency and intensity of economic shocks which disrupt business and threaten livelihoods.
Established in 2016, Global Parametrics is a specialty provider of parametric solutions for natural hazard and extreme weather risk in emerging economies. Working with the private, public and third sector, GP uses its innovative climatic, seismic and financial risk modelling to rethink resilience for a new era of risk.
Learn more at: https://globalparametrics.com/
ERN is the Latin American leader in catastrophe risk models, evaluating natural and man-made hazard that impact people, buildings and infrastructure. ERN strives to provide solutions to the needs of our clients by extending our knowledge through studies and projects in different regions of the world. ERN’s avant-garde products and services are the results of an experienced team that is always committed to offering state-of-the-art methodologies and tools because of the continuous interest in research, development and technology.
Learn more at: https://www.ern.com.mx/web/index_en.html
About Ingeniar Ltd
INGENIAR has been the main private advisor for the local government of Manizales and the Autonomous Environmental Authority (CORPOCALDAS), leading over the past years the development of state-of-the-art risk management instruments, currently operational in the city. INGENIAR has led the development of the catastrophe risk profiles and disaster risk indicators of most of the countries of Latin America and the Caribbean for the Inter-American Development Bank, and led the development of the multi-hazard Global Risk Model for the UNDRR Global Assessment Reports.