Willis, a WTW business, and Global Parametrics have completed the first payout under a parametric insurance policy designed to support coffee farmers in Vietnam affected by low rainfall during the 2024 growing season.
Vietnam is the world’s second-largest coffee producer, with the industry playing a crucial role in the country’s economy. However, coffee cultivation is highly dependent on weather conditions, particularly rainfall.
The policy, placed by Willis in early 2024 with Bao Minh Insurance Corporation, was developed to protect farmers from financial losses caused by decreased yields due to insufficient rainfall during the coffee flowering period.
Using satellite data to track precipitation levels in Vietnam’s key coffee-growing regions, the insurance is automatically triggered when rainfall falls below a predefined threshold. This eliminates the need for on-site damage assessments and expedites payouts.
The risk financing for the policy was provided by the Natural Disaster Fund (NDF), a public-private initiative managed by Global Parametrics. The NDF, which focuses on climate and disaster risk management, is supported by funding from the UK Foreign, Commonwealth and Development Office and Germany’s development bank KfW.
Laurent Bossolasco, sustainability manager at ECOM Agroindustrial Corp Ltd, a global coffee merchant, emphasised the importance of risk-sharing mechanisms in agriculture.
“It is vital for the survival of our coffee industry that the weather, market, and agricultural risks borne by farmers are shared by market participants. Changing rainfall patterns, droughts, and higher temperatures are part of the farming equation, and parametric insurance can be a meaningful tool for coffee producers to adapt to climate change,” he said.
The Coffee Climate Protection Insurance (CCPI) programme is part of a larger initiative aimed at improving agricultural risk management in Southeast Asia. It was developed through a collaboration between Willis, Global Parametrics, ECOM Agroindustrial Corp Ltd, Bao Minh Insurance Corporation, and the University of Southern Queensland (UniSQ) in Australia.
Claire Wilkinson, managing director of alternative risk transfer solutions at Willis, noted that the programme is designed to strengthen the financial resilience of coffee farmers in Vietnam.
“This programme supports the resilience of coffee farmers in Vietnam against the impacts of an increasingly volatile climate, giving them much-needed financial support and allowing them to recover quickly when adverse weather threatens their livelihoods,” she said.
Angus Kirk, chief executive of Global Parametrics, highlighted the programme’s significance.
“Many of these farmers operate on a small scale with limited financial resources, which constrains their ability to cope with the impact of deviations in rainfall and temperature patterns on their crops. We look forward to continuing our work with our partners in Vietnam,” he said.
