Weather Index Insurance for Farmers in Southeast Asia
Sompo Holdings, Inc.
Updated | July 8, 2022 |
---|---|
Publication date | December 02, 2016 |
Sector | Industrial and economic activities, Agriculture, Forestry, Fisheries |
Group Overview
Sompo Group is engaged in a variety of businesses, such as Digital, Nursing Care & Seniors, and Domestic Life Insurance, as well as in core business of Domestic P&C Insurance and Overseas Insurance.
Climate Change Impacts
Southeast Asia has been susceptible to typhoons and droughts, and the frequency and magnitude of natural disasters are expected to increase due to climate change. Natural disasters are a critical threat to farmers as it lead to crop failures; especially in emerging countries with insufficient economic infrastructure, crop failures threaten the livelihoods of farmers and local economies.
Adaptation Initiatives
In Southeast Asia, Sompo Group has been providing a Weather Index Insurance aiming at reducing agricultural business management risks. Weather Index Insurance is an insurance product that pays out a contractually predetermined insurance amount when a weather index such as temperature, wind speed, and rainfall, fulfills certain conditions. Payments made according to the results of a predetermined index leads to quicker pay out compared to a conventional agricultural insurance.
In Thailand, we conducted research on risk financing methods to manage climate change in cooperation with several organizations including the Japan Bank for International Cooperation (JBIC). In 2010, we launched a Weather Index Insurance for farmers in Northeast Thailand aiming at reducing their damages by drought. Insurance Payments are made when rainfall during a predetermined period is below a certain level. We developed a scheme with Bank for Agricultural Cooperatives (BAAC) to provide the weather index insurance for farmers who maintain loan contracts with BAAC. By using technology provided through AgriSompo, an integrated platform launched by SOMPO International Holdings Ltd.(SIH), our overseas business subsidiary, we launched a weather index insurance for Longan farmers in February 2019, while in May 2021, for sugarcane and cassava farmers. We are developing and promoting insurance products as climate change adaptation measures for farmers of Thailand’s major agricultural exports. (Fig. 1)
In Myanmar, we developed a weather index insurance that covers drought risk for rice and sesame farmers in the central arid region. This insurance, developed in partnership with the Remote Sensing Technology Center of Japan (RESTEC), makes use of rainfall data obtained by earth observation satellites. From December 2018 to January 2021, we provided a technology support for a pilot project for a Weather Index Insurance in Myanmar with Myanma Insurance and Myanma Agricultural Development Bank (MADB), which provides loans for farmers (Fig. 2).
Fig. 1 Approaches in Thailand
Fig. 2 Approaches in Myanmar
Effects / Expected Benefits
Figures and 3 BCtA marks
The purchase of Weather Index Insurance can mitigate agricultural business management risks in case of crop failures due to bad weather conditions because farmers can use the insurance payments as their income. The insurance is expected to reduce the economic vulnerabilities associated with the climate risks for farmers and local communities.
These weather index insurance in Southeast Asia has been recognized as meeting the requirements for membership in the Business Call to Action (BCtA), an initiative led by the United Nations Development Program (UNDP) BCtA promotes a development of business models with the potential to achieve both commercial success and sustainable development outcomes. (Fig. 3). This was the first time as a Japanese financial institution and a P&C insurance company in the world received the certificate. In 2016, the company received Japan’s Environment Minister’s Award for demonstrating the Principles for Financial Action towards a Sustainable Society. For our initiative in Myanmar, we received the Minister of State for Space Policy Prize, at the Second Space Development and Utilization Grand Prize presentation.
- SOMPO Holdings, Inc. “CSR-Related Materials”
- UNDP website “Introduction to the Business Call to Action (BCtA)”
- Weather Index Insurance in southeast Asia recieves Minister of the Environment Prize for "Principles for Financial Action Towards a Sustainable Society (Principles for Financial Action for the 21st Century)"
- Introduction of “Minister of State for Special Missions (Space Policy) Prize” at the 2nd Space Development and Utilization Prize.