Parametric and index-based disaster risk transfer firm Global Parametrics has structured two risk transfer solutions designed to enable partners to provide drought and excess rainfall protection for smallholder farmers in India and Tanzania.
The company leveraged a new multi-scalar meteorological index that uses monthly cumulative rainfall and potential evapotranspiration to estimate departure from the climatological norm.
Water Balance Index (WBI) utilises 40-years of daily atmospheric reanalysis data supplied by the European Centre for Medium Range Weather Forecasts (ECMWF) at a 31km resolution.
In the first of the two programs, GP has structured a risk-transfer solution for Luxembourg Insurtech, IBISA.
The solution provides a backstop designed to mitigate the impact of extreme weather events and help companies scale their operations in India.
IBISA’s program was founded in partnership with the Development of Humane Action (DHAN) Foundation and utilises a technology platform to facilitate the provision of parametric drought and excess rain cover via mutual pools to low-income smallholder farmers.
In the second of the two programs, GP has partnered with One Acre Fund (OAF), a non-profit social enterprise which provides training and finance to smallholder farmers in East Africa.
The program will use Global Parametrics’s WBI in Tanzania to provide OAF with a way to manage adverse impacts from drought and excess rain to its network of 70,000 maize farmers.
Should the index trigger, payments will be made directly to OAF who will use the capital for loan forgiveness to the farmers across impacted sites.
Both solutions in India and Tanzania are structured as an over-the-counter derivative and are backed by GP’s Natural Disaster Fund (NDF).
Through its partnership with Hannover Re, the NDF cedes 50% of the risk, bringing the global reinsurer into the transaction.
“Our Water Balance Index enables us to characterise agricultural risk anywhere in the world, particularly in areas where reliable information is not available,” said professor Jerry Skees, Director and co-founder of GP.
“Deploying the Index means we can now extend our footprint into India and Tanzania and provide protection for communities who need it most.”
