Parametric and index-based disaster risk transfer company, Global Parametrics (GP), has announced its support for the AGRIBEE Crop Insurance Pilot to provide extreme weather protection cover for smallholder rice farmers in Cambodia.
GP is providing cover for the transaction from its Natural Disaster Fund (NDF). Through the partnership agreement between the NDF and Hannover Re, the NDF will cede 50% of the risk to Hannover Re.
If the pilot is successful, financial and technical assistance facilitator, AGRIBEE, who assists stakeholders in the agricultural value chain, seeks to scale the program to up to approximately 20,000 farmers in 2021.
The transaction is being supported via Arbol, a parametric weather risk platform. This is Arbol’s second such collaboration with Global Parametrics.
Due to 85% of Cambodia’s population relying on agriculture, fluctuations in the rainy season, combined with the effects of climate change, have recently caused severe drought. This means that over 20,000 hectares of rice fields in over 13 provinces have been affected.
In 2015, the worst recorded drought hit the country and left 2.5 million people severely affected in all 25 provinces. When disaster strikes, income lost by farmers means they are unable to make loan repayments, making it hard to break cycles of poverty.
The COVID-19 pandemic may lead to increases in rates for loans, which if affected by extreme weather events, could lead to further job losses, outward migration, and wider economic turmoil for the country.
Dan Bierenbaum, the Vice President and co-founder of GP, commented: “The economic cost of extreme weather in Cambodia was highlighted in 2013 when severe flooding led to a 2% decline in the nation’s GDP. GP has stepped up where traditional reinsurers have been reluctant to provide cover, given the relative size of the transaction and innovative approach. We are confident that by leveraging AGRIBEE’s network and Arbol’s platform, we can help end the cycle of endemic poverty caused by extreme weather in the region.”
Siddhartha Jha, CEO of Arbol, added: “With rice farming accounting for 84% of cultivated land in Cambodia, the financial repercussions of extreme weather are being felt across the country, leading to mass migration and unemployment. Arbol’s vision is to bring accessibility, transparency, and efficiency to the weather risk market by utilizing our platform, which leverages smart contracts and blockchain technology to pay customers quickly and fairly when bad weather strikes.”
