Chilli farmers in southern Pakistan are set to benefit from an insurance payout of £261,243 made to Tearfund, who had taken out insurance to protect against extreme drought conditions. The payout was triggered by a severe period of hot and dry weather resulting in reduced soil moisture in parts of the country. This payout is the result of an innovative parametric product, which leverages satellite data to determine the availability of water for crops.
When the estimated moisture conditions fall below a pre-agreed threshold in a defined timeframe, the payout is triggered without the need for loss estimations. This provides fast, transparent and reliable financial relief for communities who would otherwise be threatened with extreme hunger. The payout helps farmers and non-farmers alike to proactively take measures that improve food security and avoid resorting to negative coping strategies such as selling off livestock or other long-term assets.
The severe drought triggered the highest payout available for the parts of Pakistan where Tearfund and partners are working to help communities adapt to the effects of climate change.
For Fazila, 45, a tenant farmer and mother of four, this insurance payout offers hope where there wasn’t hope before. With shrinking harvests and rising prices, Fazila has been forced to take food items on credit from the local shop just to keep her children fed.
With daytime temperatures as high as 45C for several weeks, the drought has not only strained Fazila’s income, it has reshaped her daily life. She used to collect water from a nearby canal, but now she must walk nearly two kilometers twice a day in scorching heat to collect water for drinking, cooking, and cleaning. She does not feel safe going alone, there are risks of harassment or even wild animals. The journey is exhausting, especially when she’s already drained from working in the fields and caring for her young children.
Tearfund’s Country Director in Pakistan, Jonathan Johnson, said: “What we’re seeing now is the beginning of a drought that could have devastating consequences for livestock as well as for human lives and wellbeing. Now that a payout has been triggered by these conditions, we are able to act quickly and in anticipation of the very worst scenarios. We plan to support 3,000 families – that’s around 18,900 people facing drought – with food relief, clean water for drinking, hygiene kits, suitable seeds for planting when rains eventually come and veterinary support to ensure livestock and livelihoods are protected through this difficult period of drought.
“Traditional models of aid can be too slow to prevent the worst of a hunger crisis. This new way of pre-emptively financing relief efforts protects small-scale farming communities from drought induced hunger and secures the progress Tearfund has made building resilience to the climate crisis. People at risk of extreme drought and famine must have fair access to insurance models like the one Tearfund is piloting here in Pakistan.”
This is the second payout that Tearfund has received this year. The previous payout was triggered in Malawi in February and farmers there are now getting ready to harvest the drought resistant crops paid for by the insurance, which suggests this pilot is successful as a proof of concept. Tearfund has also insured project progress in Ethiopia and Nepal. This new source of financing promises to reduce the impact, scale and the cost of humanitarian crises. It comes in the form of an innovative risk transfer product, developed by Global Parametrics (a CelsiusPro Group company) and funded through a premium subsidy from Humanity Insured, a UK registered charity backed by the insurance sector.
Charlie Langdale, CEO of Humanity Insured, said: “Humanity Insured exists to make insurance accessible to stop people from falling into poverty because of disasters. The recent drought triggered payout in Pakistan for smallholder farmers is a clear example of how innovative insurance can deliver immediate, lifesaving support. Families will now have access to food, clean water and livestock vaccinations – critical resources in the face of extreme conditions. This is the power of insurance protection for those on the climate frontline, and exactly what Humanity Insured is committed to scaling, for millions.”
Mark Rueegg, CEO of CelsiusPro, said: "I am delighted that the team at CelsiusPro Group has developed the innovative drought risk transfer solution that, supported through the Natural Disaster Fund, is delivering critical support to vulnerable farming communities in Pakistan. This payout demonstrates how pre-arranged, parametric risk financing can enable rapid, targeted humanitarian action when and where it is needed most. We commend Tearfund for their leadership in pioneering this model and Humanity Insured for making it accessible. Through public-private collaboration and smart financial instruments, we are charting a more resilient future for communities on the frontlines of climate change."
The risk capacity is provided by the Natural Disaster Fund (NDF), a disaster risk financing vehicle managed by the Global Parametrics team and funded by the UK government’s Foreign, Commonwealth and Development Office and by Germany’s development bank KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ) and which shares risks with global reinsurer, Hannover Re. The product is developed with a catalytic grant1 provided by the NDF Technical Assistance Facility, funded by KfW on behalf of BMZ.
This new risk transfer solution is just one of the ways that Tearfund is collaborating with the insurance industry to harness new technologies and digital tools to the benefit of the world’s most climate vulnerable communities. Tearfund is also working with partners in Ethiopia to develop new digital technologies to support farmers in remote locations.
For more information about the work of Tearfund or to donate, please visit tearfund.org
ENDS
For further information or interview requests call Esther Trewinnard on 07783 409045 or for out of hours media enquiries please call 07929 339813.
1 Catalytic grants are designed to jump-start innovation in responding to the climate crisis.
Notes to the Editor
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Tearfund is a Christian charity that partners with churches in more than 50 of the world’s poorest countries. We tackle poverty through sustainable development, responding to disasters and challenging injustice. We believe an end to extreme poverty is possible. Tearfund is also a member of the Disasters Emergency Committee (DEC). For more information about the work of Tearfund, please visit tearfund.org.
Global Parametrics, a company of the CelsiusPro Group, focuses on developing parametric risk transfer solutions that create a positive impact for vulnerable communities in countries prone to extreme weather and natural catastrophe risks. The company mobilises risk capacity to underwrite parametric risk transfer through dedicated structures, which are backed by reinsurers with AA-ratings. The Global Parametrics team manages the Natural Disaster Fund (NDF), a public-private partnership with capital committed by the UK government's Foreign, Commonwealth and Development Office, and Germany's development bank KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). globalparametrics.com
The Natural Disaster Fund (NDF), launched in January 2018, is a blended risk transfer vehicle designed to mitigate the challenges in climate and natural catastrophes (NatCat) resilience for low-and-middle-income countries. Global Parametrics Limited also manages the NDF’s Technical Assistance Facility, a grant funding facility funded by BMZ which is designed to strengthen the availability of impactful risk transfer solutions in countries eligible for official development assistance (ODA). naturaldisasterfund.com
Humanity Insured, set up with the backing of the insurance industry, is a registered charity in the UK (Charity Number:1209214), and a registered not-for-profit non-stock entity in the US. Humanity Insured uses private and philanthropic capital at scale to help people on the climate crisis frontline access and pay for new forms of insurance. It is making insurance accessible and effective for vulnerable communities, empowering them to build climate resilience through financial resilience, and helping them protect their futures. For more information, please visit humanityinsured.org
