WTW creates parametric insurance in Sri Lanka
WTW has launched what it says is Asia’s first 4-peril parametric insurance to protect Sri Lanka’s shrimp farms against weather risks.
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 diverse range of risks and uncertainties, most prominently the exposure to weather risks across coastal regions where farms are traditionally located. To safeguard Taprobane against such vulnerabilities and unwind potential bottlenecks that constrain the injection of much needed capital, WTW has structured a 4-peril parametric insurance solution that 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, in turn enabling the growth of aquaculture in Asia and easing the ongoing food security concerns.
Marc Paasch, global head of alternative risk transfer solutions at WTW said: “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.”
Taprobane will use the funding from FMO to rehabilitate abandoned farms owned by the company and by third-party growers, as well as invest in new farms, circular tanks, hatcheries, and a new processing facility. This will also help to support the employment of local employees that are made up predominantly of underprivileged women, including war widows, throughout the northern and northwestern provinces of the country.
“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,” said Richard Zhang, head of alternative risk transfer solutions, Asia at WTW. “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.”