WTW, a global advisory and broking company has launched Asia’s first 4-peril parametric insurance to protect Sri Lanka’s shrimp farms against weather risks, marking a major turning point in Asia’s aquaculture development.
According to the firm, the solution was designed and placed for Taprobane Seafood Group – Sri Lanka’s largest seafood company – helping them to meet a critical condition to secure $15 million in project financing from Dutch entrepreneurial development bank FMO.
Shrimp farming is associated with a wide range of risks and uncertainties, with the most common one being the exposure to weather risks across coastal regions where farms are traditionally located.
To safeguard Taprobane against these vulnerabilities and unwind potential obstacles that constrain the injection of much needed capital, WTW has structured the region’s first 4-peril parametric insurance solution which covers four key weather risks: earthquake, typhoon, excess rainfall and heat stress.
With the parametric insurance solution, Taprobane is able to secure the loan to develop sustainable shrimp farming and provide gainful employment to vulnerable communities locally, therefore enabling the growth of aquaculture in Asia and easing the ongoing food security concerns.
“In the face of climate change, the growing susceptibility to natural catastrophes across many Asian markets could mean that food producers based in at-risk locations can suffer adverse impact, affecting entire societies. This signifies an urgent need for innovative insurance and financing tools to better protect businesses. Our new 4-peril parametric insurance provides an efficient and simplified solution to support businesses vulnerable to multiple weather events that are not covered by traditional insurance products in the market,” commented Marc Paasch, Global Head of Alternative Risk Transfer Solutions at WTW.
In addition, Taprobane will also use the funding from FMO to rehabilitate abandoned farms owned by the company and by third-party growers. The funding will also be used to invest in new farms, circular tanks, hatcheries, and a new processing facility.
As a result, this will help to support the employment of local employees that are made up predominantly of underprivileged women, including war widows, throughout the northern and north-western provinces of the country.
Pieternel Boogaard, Director Agribusiness, Food, and Water at FMO said: “Amidst challenging market conditions, the parametric structure has provided the much needed insurance protection when no traditional products were available. This significantly reduces the credit risk associated with the project financing, enabling FMO to play a key role in scaling local shrimp farms production, driving sustainability and economic development among some of Asia’s most vulnerable communities in line with our updated Strategy 2030: Pioneer, Develop, Scale.”
Richard Zhang, Head of Alternative Risk Transfer Solutions, Asia at WTW added: “Using innovative risk analytics to underpin this bespoke parametric structure, WTW has demonstrated how we can play a critical role in ensuring that companies like Taprobane received the needed financing and insurance to protect their businesses . This will open the door for more sustainable seafood farming and mitigate the effects and impacts caused by climate change, which has been a challenge increasingly faced by local farms in Asia. Our unique solution will be critical to unlock the growth of aquaculture and meet the increasing food demand in the region.”
