Page 17 - IB October 2021

Cover

A woman and her daughter in the remains of what was once their home in the aftermath of Cyclone Winston.
Photo: File
INSURING AGAINST DISASTER

By Samantha Magick
Piloting parametric insurance
As November nears, the thoughts of many Pacific islanders Parametric insurance is a form of insurance linked to
turn to preparations for the South Pacific cyclone season. Are certain, pre-defined parameters. These include specific
there matches and candles, batteries and bottled water in the windspeeds (e.g. Tropical Cyclone categories 3-5) and specific
house? Are the hurricane shutters in good condition? rainfall levels. These pre-defined triggers need to be met for
But despite their best efforts, there is little that can be insurance to be paid. However unlike traditional coverage,
done to shield crops in the field from devastating visitors like which requires a whole host of assessments to be undertaken
Winston or Hal or Yasa. before any payouts are granted, the payments are almost
In Fiji this year, a different kind of disaster preparedness immediate.
is being trialled. A parametric insurance scheme is being “The payment is made to take care of the immediate cash
piloted, with an eye to rolling out similar schemes in other liquidity that the farmer or the fisher, or the small business
Pacific Island nations. needs to jump back into life,” says the UN Pacific Insurance
Just 15% of Fijians have some form of insurance accord- and Climate Adaptation Programme (PICAP) Programme Man-
ing to the recently-released Financial Services Demand Side ager, Krishnan Narasimhan.
Survey. The Reserve Bank survey says this figure is lower than “Normally what happens nowadays is that there are lengthy
expected “given the recent bundled insurance developments, assessments done by NGOs or government agencies that could
and may indicate that some respondents are not aware that take weeks, and by the time the actual post-cyclone sort of
they have insurance cover, therefore suggesting a need for relief flows to the people affected, it could take months.”
more awareness.” Take up is higher for high income groups, Instead, after a Category 3, 4 or 5 cyclone, parametric
and there is a geographic imbalance too, indicating “a need insurance policy holders who were in the path of the cyclone
for focussed awareness and accessibility of insurance in East- (as determined by geodata entered when they signed up),
ern and Northern Divisions particularly when these areas are would be entitled to a payout.
most affected by natural disasters.” PICAP is providing technical support and momentum for the
Most of the survey respondents were unaware of any spe- pilot, which is offering cover to sugarcane, rice and copra
cific climate-related financial products, and only 2% reported farmers, fishers, and market vendors through cooperatives for
holding a climate-related insurance policy. 12 months, commencing September 1, 2021. Already 500 have
Yet the impact of climate-induced shocks (such as cyclones, signed up, and PICAP anticipates the coverage to reach nearly
droughts and floods) is severe for Pacific economies and 1000 by November before onset of the next cyclone season.
particularly for those citizens working the land. For example, The governments of India, Australia and New Zealand have
when Tropical Cyclone Yasa hit earlier this year, a survey by provided financial support for the pilot. FijiCare launched the
Fiji’s commerce ministry and the International Finance Corpo- first product in August, with Executive Director, Avi Raju com-
ration found more than 1500 businesses were affected to the menting: “We are thrilled to launch ClimateCare, an inclusive
tune of US$12million. Only a fraction of them were insured and innovative solution…Parametric microinsurance product is
against the disaster. an extension of the bundled microinsurance product that Fiji-

Islands Business, October 2021 17