Parametric Drought Insurance
Pre-agreed payouts when the season stays drier than an agreed trigger, for businesses whose losses depend on the rain.
How it works
Parametric insurance: the trigger and the payout are agreed before cover starts.
- Step 01
Event measured
An independent data provider reports daily rainfall, and potential evapotranspiration, at the agreed location throughout the cover period.
- Step 02
Agreed threshold met
Cumulative rainfall, or the average water balance, falls short of the trigger agreed before cover starts.
- Step 03
Pre-agreed payout
A fixed amount is paid for each mm of shortfall, up to the cover limit.
Dry Season Cover
Payout for deficit cumulative rainfall
Cumulative rainfall is defined as the sum of daily rainfall during the policy period.
If the cumulative rainfall is less than the trigger amount of rainfall, the policy holder will receive a fixed amount for each mm of rain shortfall up to the cover limit.
Agriculture, hydropower production, and other industries where losses depend on the amount of rainfall deficit.
Example
- Cover period
- May 1st – 11th
- Trigger
- < 10mm
- Payout per mm
- USD 10,000
- Cover limit
- USD 100,000
During the cover period, the independent data provider reports 7mm of rainfall.
Hover over a day to see it on the chart
| Day | 1 May | 2 May | 3 May | 4 May | 5 May | 6 May | 7 May | 8 May | 9 May | 10 May | 11 May |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Rainfall (mm) | 0 | 2 | 0 | 1 | 3 | 0 | 1 | 0 | 0 | 0 | 0 |
| Cumulative rainfall (mm) | 0 | 2 | 2 | 3 | 6 | 6 | 7 | 7 | 7 | 7 | 7 |
Payout(10mm trigger – 7mm cumulative rainfall) × USD 10,000 per mm = USD 30,000
Low Water Balance Season Cover
Payout for deficit water balance
The daily water balance is the daily rainfall minus the daily potential evapotranspiration.
If the average of the daily water balance over the full risk period is lower than the trigger value, the policy holder will receive a fixed amount for each mm of water balance shortfall up to the cover limit.
Agriculture, hydropower production, and other industries where losses depend on the amount of rainfall deficit.
Example
- Cover period
- May 1st – 11th
- Trigger
- < 5mm
- Payout per mm
- USD 10,000
- Cover limit
- USD 100,000
During the cover period, the independent data provider reports daily rainfall and daily potential evapotranspiration that lead to 1.9mm of average water balance.
Hover over a day to see it on the chart
| Day | 1 May | 2 May | 3 May | 4 May | 5 May | 6 May | 7 May | 8 May | 9 May | 10 May | 11 May |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Rainfall (mm) | 7 | 2 | 0 | 0 | 3 | 8 | 15 | 3 | 0 | 0 | 0 |
| Potential evapotranspiration (mm) | 0 | 1 | 3 | 4 | 1 | 0 | 0 | 1 | 2 | 3 | 2 |
| Water balance (mm) | 7 | 1 | −3 | −4 | 2 | 8 | 15 | 2 | −2 | −3 | −2 |
| Average water balance (mm) | 1.9 | ||||||||||
Payout(5mm trigger – 1.9mm average water balance) × USD 10,000 per mm = USD 31,000
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