Shaun Tarbuck:

Welcome everybody. My name is Shaun Tarbuck. I’m the Chief Executive of ICMIF. We’ve got a wonderful lineup of speakers today for our Mutual Parametric Solutions webinar. These are stories, success stories of where we are utilizing parametric solutions in a mutual way. Something that I do believe is going to be a very important way of delivering services to the members in every country in the world, and also hopefully closing the protection gap. So without further ado, I’d like to introduce you to our panel of speakers. We will start with Lesley Ndlovu, from ARC, African Risk Capacity. He is the CEO there, has been the CEO for two or three years now and has a great background in many areas of the insurance world, including working for AXO and helping deliver some of their solutions there as well.

Then we have Noel Raboy, who’s going to be co-presenting with Dorien around the parametric solutions that they’re putting in place for CLIMBS in the Philippines, which is a vital partner in helping deliver on those. So I hope you’re going to learn a lot. I know I’m going to today, so I think it’ll be a fabulous webinar and please do let us know if you’ve got any questions in the chat. I will ask those at the end of the presentation, of both presentations, and then we can hopefully have a little bit of a debate as well between the panelists. So I will turn over to our first speaker. Lesley, over to you.

Lesley Ndlovu:

Thank you very much, Shaun. Good morning, good afternoon, good evening to everyone. I wanted to share with you today what we are doing practically from a parametric insurance standpoint and how this fits in with the broader climate change mitigation discussion that is going on. I am the CEO of the African Risk Capacity Limited, which is a specialist mutual insurance and reinsurance company focused on ensuring Africans against extreme weather such as droughts, floods, and tropical cyclones. If I can move on to the next slide please.

So very quickly, we are a specialized agency of the African Union and we have the specific mandate within Africa to create climate-related disaster insurance. So as I’ve already mentioned, we provide insurance coverage against extreme weather, droughts, floods, and tropical cyclones. We were established in 2012 as Africa’s response to the increasing frequency and severity of natural disasters. We are a member-based institution and currently we’ve got 35 member states across the African continent. Moving on to the next slide.

We design insurance and reinsurance solutions that target sovereign and non-sovereign. And for us sovereign refers to macro-level insurance. So this is insurance that is taken by the government itself and the way it works is that if the insured event happens, such as a drought, a flood, or a tropical cyclone, we then pay a claim to the government via the National Treasury. And these funds are then used to mount relief efforts. Parametric insurance has the benefit of paying claims very quickly since we pay claims based on the modeled losses and we don’t do any loss adjustment.

We pay claims typically within three or four days of an event happening, which then puts money into the hands of the government to launch relief operations very quickly. And as we all know, the faster you can get the money into the hands of the beneficiaries, then the better the outcome is for everyone. What we call non-sovereign, in our jargon, refers to insurance that is taken out by anyone else other than the government. And this is what you would call micro or meso insurance schemes.

We work across the entire value chain with farmers, with aggregators, with brokers, and also with sedans when we do reinsurance. It is estimated that the benefit of early intervention when it comes to natural disasters is fourfold. It means that a dollar invested in early response is worth $4 that comes through the traditional response systems. Moving on to next slide.

So then just again to spend a little bit more time explaining to you the three levels at which we work. As I’ve mentioned, we work at what we call the macro level. So the macro level is the insurance that we provide to governments. We also work at what we call the meso level and then this is what you would think about as indirect insurance. And this is insurance coverage to, for example, banks or microfinance institutions that finance the farmers. Our insurance products would protect them from excess default because if there is a drought or a flood, then it impairs the farmer’s ability to repay the loans and they will see a spike in their defaults. So we can provide insurance against excess defaults and the whole idea behind this is to de-risk lending to farmers, to make funding more accessible so that small to medium-scale farmers can invest in their production.

We also provide what we would call micro insurance, which is insurance that we’re providing directly to the small holder farmers and we usually provide this via reinsurance of a local insurance company. So at the African Risk Capacity, in addition to providing insurance, we also provide risk assessment, contingency planning, capacity building, and also animating the wider network of stakeholders that are involved in this type of insurance, which has a very strong social development angle to it. Moving on to the next slide please.

So then I just wanted to share with you just the countries that have participated in our insurance programs. As you can see, we’ve got a very good representation of the African continent. Moving on. ARC has been in existence since 2014 and we are really proud of the fact that, in the years that we’ve been existent, we’ve facilitated the transfer of over a billion dollars worth of risk from the African countries into the global reinsurance markets. We have paid over $125 US in claims. We provide insurance coverage to about 30 million people per year, and six million people have directly benefited from the payment of claims.

And again, this really demonstrates the value of parametric insurance and the difference that it makes for people on the ground because behind all the numbers that I’ve mentioned is really people who have benefited from insurance in their time of need, which is, if you think about it, really the core value proposition of insurance, of helping out people who are in need, and it goes back to the foundations of insurance, which is about neutralization of risk, which is about creating a solidarity mechanism and through what we are doing, we witnessed this in action. Moving on to the next slide please.

So again, just to give you some indication of what our growth perspective is, as I mentioned, we are covering about 30 million people per year, but in the African continent there are about 700 million people whose economic activities can be disrupted by extreme weather. We would like eventually to provide insurance to all the people that need it, making insurance more accessible, more available, and more affordable.

However, within the next five years we want to get to at least 200 million people being covered by insurance. So it’s almost a six to seven-time increase in the level of coverage that we have now. We world like to be generating over a $100 million of premium and facilitating over $1 billion US of risk transfer every single year. This is especially important on the African continent because we are witnessing an increasing frequency and severity of natural disasters, exacerbated no doubt by climate change. So it’s really important for us as an organization to have the tools and the means to make risk transfer more mainstream. Moving on to the next slide. And then maybe just to again share with you what we have learned in running insurance programs in Africa over the last nine years. The first key success factor is around political engagement. There has to be willingness at the level of the country to support insurance and to make it more available because insurance is a powerful risk mitigation tool.

The second key ingredient is around the ability to develop strong relationships and partnerships. We are not able to do everything by ourselves in the value chain. We rely on our partners to help us with the development of indices, to help us with the design and marketing of the products. We rely on the governments to pay the premium and also to create the conditions in the country necessary to have a successful insurance product.

The third ingredient is around innovative research and development. We are constantly fine tuning our products to make them more relevant to the needs of the countries. We are also continuously launching new products to expand our risk coverage. In the last three years, we have launched a tropical cyclone insurance product that covers damage from wind speed, that covers damage from storm surge, that also covers damage from excessive rainfall. We have launched a flood insurance product targeting fluvial flooding.

We’re in the process of finalizing our product for flash floods in the urban areas and we have also successfully launched an outbreaks and epidemics product, obviously in response to the pandemic that we have just gone through. So it is really important that we continuously get feedback from our members in terms of what their pain points are, in terms of what their needs are, and then be able to develop insurance products that speak to that need.

And then the last but not least point is that we continuously conduct monitoring and evaluation to make sure that we are learning from the products that we have, from the clients that we have, and we’ve close the feedback loop. And this is essential for us as an organization to be continuously learning and adapting and being better able to serve the needs of our members. Moving on to the next slide.

So then again just to illustrate to you the multiple partners that we work with at the level of governments but also with donors because our insurance programs are sometimes heavily subsidized to encourage uptake. We also work with other developmental financial institutions on the African continent, such as the African Development Bank. We also provide insurance to humanitarian agencies, such as the Start Network and the World Food Program, because very often these humanitarian agencies have to scale up their operations within the countries whenever there is a natural disaster. Moving on to the final slide. Just to say thank you very much for the opportunity to present today and thank you very much for your time and of course I look forward to your questions and comments once we get to the Q&A.

Shaun Tarbuck:

Thank you, Lesley. Great presentation and overview of how you deliver real value where it’s needed. I’m sure we’ll get some questions, but if you can post them into the chat, we will take them at the end of the presentation. So now we’re going to turn over to Noel and to Dorien to do a joint presentation on the initiatives you have for CLIMBS in the Philippines.

Noel Raboy:

Okay, thank you. Thank you, Shaun, and good morning, good afternoon and good evening to all. I would like to thank the ICMIF for giving us this opportunity to present with you related to our initiative on this innovative program of barometric insurance. We would like to thank also Dorien for sharing us that technology. So to give a little background, I am Noel Raboy from the Philippines, the president and CEO. CLIMBS is a composite insurance cooperative, a member of ICMIF and we are 100% owned by the cooperatives, based on values and principles of the cooperative movement. So please, next slides.

Looking into the Philippines, next slides please, we can talk about challenges related to the climate change. Can you go back again please? Okay. The developing countries like the Philippines is mostly vulnerable to this climate change. Looking into four typhoons or 21 typhoons that will pass by within our area of responsibility and four to five typhoons will cross land within our area and then with a lot of damages.

So we can imagine how the poor, especially the farmers, suffer mostly in terms of this climate change. A farmer, he has nothing to do but to plant again, even though he will experience again the damages onslaught by this typhoon and extreme weather, especially excess rainfall and wind speed. So climate change is likely to reduce economic growth in developing countries. Next slides please.

Now, in the global climate risk index you can see the… Next slides. Okay. We are in the number four, looking into the number of events from 2000 to 2019. Even though if we will add on the Puerto Rico, Myanmar and Haiti and even Zimbabwe, it cannot still surplus the number of events, how that will happen in the Philippines. So we are very vulnerable. 30% of the typhoons that being developed is in Asia Pacific. That will be mostly will pass by in this, our area. Next slides. Next slides please.

So in case also of damages, even the government, we are shifting our strategies on how we can strengthen our resiliency and preparedness, since these typhoon and extreme weather do mostly create damages per capita income and even lifestyle of Filipinos. But when we talk about this is the way of life, but CLIMBS, through our cooperative network, initiated some programs in order to be resilient and support also the government initiative towards food security, because extreme weather results to some disruptions in our food chain. Next slides please.

Just lately we have this super typhoon Noru that damages around three billion in terms of agro-related and infrastructure of around 300 million. So it’s just newly passed by in our territory with a separate typhoon category. So even the Department of Agriculture said that 1.7 million hectares of rice and corn in Luzon may be affected by the super typhoon. So this is just last quarter of this month and we expect a lot going towards this end of December. So that’s how vulnerable, our country. Next slides.

What we are doing right now, there’s a need for us to innovate. That’s why we are very thankful in 2019, together with Sabir, that initiated us to connect in the member of ICMIF, like IBISA, because we believe in 2012 as we started our parametric product and then there was already a clamor and acceptability. So we try to connect on how we can come up with a parametric insurance, whether index insurance, that will support the cooperative movement, especially our agro-cooperatives in the Philippines.

So this development, even though it’s pandemic, but technology, using technology also connect us or to come up with this product. So by having this development, we add on also the other partners, like the CIAT, to have a smart farming program, smart farming that can support also the farmers as not just only as an insurance. So the capacity-building related to climate change, we focused on adaptation with particular attention on reducing vulnerability of the poor, and we invest so much also on preparedness, even our way of infrastructure and financing.

ESG also is part of our advocacy in our network. We have around 4,000 co-ops in the Philippines and most active of that is more than 2,000 cooperative. So this is a lot of convincing, but we have this very unique identity as a cooperative. The values of the principles that we are really raising this awareness, our identity. So on that, also, we are very thankful for this government right now because they acknowledge that there is really a food security issue.

So it is where that the government said we need financing and technical support on how to help our farmers connecting, motivating our farmers to plant more, and without insurance, without protection right now. So how can we support this now? So we align also our strategies, like looking into… Next slide please. We are looking into 100,000 farmers that we will support. So I think on this parametric before to that slide, before this parametric program, we will pass it on how this parametric insurance works with a presentation of Ms. Dorien.

Dorien Asampana:

My name is Dorien Asampana, and I work as a project manager for IBISA Network. IBISA is a Luxembourg-based company and I am calling in from the Netherlands.

So EBISA works with mutuals like yourselves and other stakeholders involved in the agricultural space to enable agricultural index-based micro-insurance or parametric insurance. And we do this by designing products and helping mutuals like yourselves operate these products. We do this because we believe that Earth observation data and other types of technology really have the potential to unlock this market and to bring protection to everyone, using this technology. So in the next few minutes I would like to give you a very concrete example of how we do that, by means of the partnership that we have with CLIMBS.

I’d like to let you know that just five days ago we started our second year of working together with CLIMBS. We’ve had a first year of cover that was from 2021 until 2022 where we covered the cooperatives that are part of CLIMBS in 15 provinces in the Philippines against excess rain. We use satellite data and other Earth observation techniques to look at how much rain fell in each of the provinces that the cooperatives of CLIMBS are insured in.

And then we check for almost in realtime with how much rain fell and if there is a payout in those provinces. In 2021, 2022, we had a total of $2 million-some insured. And in this next year that has just started, the new year of coverage, we have added a new peril, which is wind. So we’re now protecting cooperatives from excess rain and excess wind and we have grown from 14 cooperatives to more than 100 this year in more than 40 provinces.

So we see that in the Philippines there’s really a high demand for this kind of a product. Also, in terms of some insured, there’s been a huge growth from two million or so to 5.2 million. We think that this is due to the fact that parametric insurance is generally more affordable than the more traditional crop insurance products. With the help of the platform, as well, it is much more transparent. So we can tell cooperatives before the season starts that, if there’s more than this amount of rain, you will get this amount in payout, and also it’s more rapid.

We see that, with traditional insurance, often there needs to be crop-cutting exercises. Someone needs to come to your field, determine what the loss is and if that loss is due to the weather event. And with parametric we can see within five days how much rain fell or how strong the wind was. And cooperatives can see this themselves on the platform. So if you wouldn’t mind to make me a presenter so that I can show you the platform live, I will show you the platform. Thank you.

Good. I think that you can see my screen now. So we are looking at the IBISA-CLIMBS platform where every cooperative can see, hopefully in a very easy way, how much rain fell and if there has been any trigger, if there’s any payout due for them. So here we are looking at an example, sorry, of a cooperative in the Philippines that has a number of different provinces covered. You can see that all these ones that have a color here are different provinces and they all have coverage for excess rain. And everything that is green here means that there has not been a payout or a trigger. And you can see that this blue line here is the recorded rainfall that fell, and it’s as recent as five days ago. So in almost realtime, cooperatives and CLIMBS users can see how much rain fell in each province.

So here we see that for the 29th September on the province of Palawan, there was about 4.9 millimeters of rain that day. And then you can see that these lines here, the yellow, orange and red, represent the values at which there will be a trigger. So a yellow trigger is a lower payout and orange is a bit higher and a red is the highest payout.

And you can see that for the province of Bohol here, for example, we did actually record a payout and this was on the 16th of December last year, which as you may remember was typhoon Odette that hit the Philippines at that time. And so CLIMBS made the payout upon seeing this and they were able to do so within 10 days. So cooperatives had these funds available to themselves and to their farmers within 10 days after the typhoon hit.

I would also like to show you, here in product there’s a bit more information about the structure of the product, but I’d also like to show you the historical rainfall here. This is something that can also be used by CLIMBS as kind of a sales tool where they can ask their members, “Do you remember any year that was particularly bad in terms of excess rainfall?” And let’s say that in Palawan, for example, they said that 2000, or let’s say Northern Samar, let’s say that someone was talking to a cooperative in Northern Samar and they said, “Oh yeah, we remember that in 2018 there was one that was really bad.” So they can come here and show them in almost realtime how this product would have performed in 2018 and they could have seen immediately if there would have been a payout with this product.

And we see exactly that, I believe it was Typhoon Usman, in Northern Samar in December 2018 actually did trigger a payout here and hopefully that would give cooperatives some more confidence that this is a product that they like. And we see from the increase in the demand between last year and this year that this is actually something that is helping. We work together, as Noel mentioned before, with CIAT, the CGIAR Center on Tropical Agriculture. And this section here is for data that they provide. So they have customized agricultural extension services or agricultural advice, and we have made it available to all cooperatives here. So that, buying the weather insurance product doesn’t only come with the risk transfer, but also even if there is no payout, gives them this added value of the advice.

There are different types of advice, including for example, which varieties to select under normal conditions, with wetter conditions or drier conditions, and things like that. I’ll stop sharing my screen now. And then there’s one more slide that I would like to present, Shaun, if that’s possible. I think you need to share your screen again.

I would just like to mention, if you go to the next one, yes, the different roles. So as you’ve heard, as I was talking you through the platform, CLIMBS obviously does the underwriting and has on-the-ground feedback loops and also contact with the cooperatives to do sales and marketing and payout administration. We at IBISA do the insurance product design, together with our partner, Global Parametrics. We also designed the platform that you just saw and we make sure that the technical data, the Earth observation data is available there throughout the season.

And then CIAT does the design and dissemination of the agro-advisories that I also just showed you. And then lastly, last slide, it’s just one lesson that we learned. As we did this for a year, we thought about what we could improve and one of those is to add the index for wind speed, because we saw that there were many payouts for typhoon Odette, but one province that didn’t get a payout was Cebu.

And when we checked the rainfall data against the wind speed data, we saw that if there had been a wind speed index like you see here in the second graph, they would have actually had a red payout, whereas there wasn’t enough rain for Odette in Cebu to trigger a payout. So for the product that we have as of five days ago, we have included wind speed to just improve the product and have better protection. That’s all from my side. If you have any questions, I’d be happy to answer them in the next section. Thanks.

Shaun Tarbuck:

Thank you. Noel and Darien. If anyone has any questions, please do put them in the chat there. I’ve certainly got a few questions and maybe if we’ll start with the CLIMBS and IBISA example. You said that of the data comes from CIAT. Is there a cost to that information you get? Because obviously it’s very technical. It’s probably tricky for them to gather. Do they pass the cost on to the product or not?

Noel Raboy:

Thank you, Shaun. The CIAT partnership, it’s not cost at all. Our partnership is based on the available data that they have for helping also our coop team through mutuality.

Shaun Tarbuck:

Okay, so they don’t charge. And then probably a followup question to that in terms of the parametric product itself, one of the big benefits is that it’s usually very, very cheap for properties, or anyone, to buy because it pays out of fixed withdrawals. Can you talk a bit about the product design, what level is the pricing pitched at and what would the payout be if it’s triggered by rainfall or wind storm?

Dorien Asampana:

Yeah, sure. So yes, indeed, the pricing, as you hinted at, Shaun, changed a bit between last year and this year because we look at the needs of whomever we are working with. So in the case of CLIMBS, we looked at the cooperatives. We saw that what they want to ensure is their loan portfolio. And so we looked at what are those cooperatives composed of. We saw that they’re often very much spread out throughout the province. So what we did is we designed a product that is at the province level, that is meso level and that is crop agnostic.

And initially it included only excess rain because we thought that that was the biggest risk, in talking to them. But now it has changed. So the product design is taking all of those factors into account, and indeed the more risks that we include, the higher the costs are going to be. So I believe, if I’m not mistaken, Noel, the first product was sold at 5.5% of some insured. That was for excess rain only. The current product, the coverage of which started five days ago, is sold at about 8%, if I’m not mistaken. But it now has the two components. So there can be rain triggers or wind triggers or both at the same time. That’s what we’ve taken into account when the product is designed.

Shaun Tarbuck:

What is the maximum level you can pay out on a claim through the product? You said it’s 8% of the payout now, 5.5 before. So what is the maximum payout that you would have?

Dorien Asampana:

The maximum payout per event is 20% for the rain trigger and 20% for the wind trigger, so 40% in total if you had both, for a typhoon for example, so that’s 40% of some insured. But the coverage is for one year, which means that there could be, and in fact we have seen in this first year that some cooperatives had two triggers for two different typhoons, for example, or two different excess rain events within that year. And so in that case there can be two times 20% for two rainfall events, with a maximum of 50% of some insured.

Shaun Tarbuck:

Okay. And what would that figure be in dollar terms?

Dorien Asampana:

So if let’s say we had a loan portfolio of $1,000 for a cooperative, that would mean that it would be $400 for one event. So that could be $200 for a rain trigger and $200 for a wind trigger, for let’s say one typhoon. And there could be multiple of those within the year that you’re insured. So if there were to be multiple, the cap that we’ve put in place is 50%, which would be $500.

Lesley Ndlovu:

Sorry to interrupt, but if I can just also contribute to the conversation by asking Dorien and Noel if they have a reinstatement premium for the multiple events, because it’s something that we’ve looked at but we’ve never been able to really solve. So we have just a pay event limit.

Dorien Asampana:

Yeah, I can take this question. We have the 50% annual limit, so in fact what you’re saying is true. If in the first month of coverage we have a 20% payout, then that leaves us with only 30% to be paid out over the remaining 11 months of the year of coverage. In practice, of course, it is unlikely that this would happen very frequently, looking at this room a statistical point of view. But yes, it’s possible.

And I agree with you that one of our principles also is to keep the product as simple as possible. That’s also why we work with the different colors to be able to explain it to people that probably don’t have as much technical insurance knowledge as we might have. And so we do sometimes make that trade off between sometimes accuracy or more sophisticated features to the product and the ability to explain it to the typical kind of customer.

Shaun Tarbuck:

I’ll come to you, Lesley, in a minute. I’ve got a few questions for yourself. Just to sort of complete that with you, Noel, it’s an impressive growth from 14 cooperatives to 100 cooperatives in the year. But what is the market potential there and do you have a target of how much penetration into your total membership you’d like to achieve, and over what period would that be?

Noel Raboy:

Okay. We targeted really about for this year around 100 cooperatives with upload portfolio of around five billion. And maybe it’s related also on the questions of is this price high or low? We are invoking the principle in the cooperatives of solidarity, equity and self help. And this really, the climate change issues here or what’s happening now in the Philippines is real. As I showed you already, lastly, it’s happening.

So our co-ops now tend to shift, accepting that there’s no way forward but to join this bandwagon and maybe in the future. That’s why we are advocating also this one, promoting this one to the government through our Climate Change Commission so that we can sit down maybe and do some government PPP projects, how we can support the farmers. Because the only thing that we can support our cooperatives is this kind of insurance. There’s really a need and there’s really a demand already, having the 105 cooperatives enrolled for the second phase.

Shaun Tarbuck:

Thank you. Lesley, turning to you. In one of your slides you showed the macro, meso and micro levels. Mostly, ARC was started for the macro piece. How are you moving into the meso and micro? Maybe you can give us a bit more detail on that.

Lesley Ndlovu:

Yeah, thank you very much. Maybe if I start by just explaining the difference in our approach. At the macro level we usually have just one client, which is the government. So from an engagement standpoint, you have only one stakeholder and as you start to move towards the meso and micro, then the number of clients starts to increase. So as a business, we’ve taken the deliberate decision that we didn’t want to invest in a distribution footprint because, firstly, we don’t believe it’s scalable because what we see is that what makes you successful in one country isn’t going to make you successful in the next country. So it’s difficult to have synergies between your distribution teams in the different countries, which also means that you have to build quite a large team in order to effectively serve the markets.

Secondly, distribution is not our expertise. It starts to take us away from our core competence in underwriting, claims management and reinsurance. So then this means that we have adopted a partnership strategy where we have developed partnerships with other organizations that are skilled at this type of work. And as an example, we have taken a shareholding in an aggregator, and aggregators are the people that use technologies. So smartphone apps, USSD codes, to sign up large numbers of farmers onto a platform. And through this platform they’re able to offer farming advice or when to plant, when to harvest, when to apply fertilizer, give weather warnings. And this is attractive for farmers to sign up.

But then in add addition to this free service, if you may call it, they then provide other services to the farmers, such as seeds, fertilizer, financing, and of course insurance. So we have taken a shareholding in one of these platforms, called Puller, which is the largest aggregator platform in Africa, and we have become their insurance partner. So then this allows us to access the market without needing to develop the footprint ourselves. This is just an illustration of the type of partnerships that we develop because we don’t want to stray away too much from what we view as our core competence and where we believe we have a unique value proposition.

Shaun Tarbuck:

Well, that makes a lot of sense. And it sounds as if maybe there’s a partnership there as well to access some of the intelligence IBISA has there on the ground for some of those solutions. Because your aggregate will do the distribution side, but then who will manage the other piece? Because you’re moving from the macro to what sounds like a great micro service or direct to the farmers. Is that something that you’ve already got in place?

Dorien Asampana:

No, we don’t have that in place with ARC yet, but I think there’s a lot of interest from our side, I think for us there’s the need and also there is a lot on the ground.

Lesley Ndlovu:

Yeah, and there is a lot of interest on our side. And I think, Shaun, you’ve succeeded at being a matchmaker.

Shaun Tarbuck:

We’re a matchmaker. That’s perfect. Just, Lesley, on some of the numbers that Dorien and Noel talked about, in terms of it being sort the 8% of the potential loan, would you do your micro level, would you do it on a loan basis or would you do it on basically a loss of crops basis rather than say you’ve got a certain amount and we help pay for the renewal of the agricultural losses?

Noel Raboy:

Okay. In our area, setup with CLIMBS, since we are a secondary organization, our ownership based on primary cooperatives with individual membership. So the meso level fits perfectly with us, but we have this kind of MOU, a memorandum of agreement, with our partners of our co-ops that they have to see to it that the claims will be downloaded, will reach down to the farmers. So we try to look into the 30-70 scenario that the proceeds of the claims will be given in any form, but if possible in terms of purchase of fertilizers, organic fertilizers, and maybe all of the pay for the farmers to the primary cooperatives. And 30% will be another maybe fund for disaster for future purposes, to create calamity fund internally with the co-op. So me level is simpler than the macro level.

Shaun Tarbuck:

Do you have a comment on that, Lesley?

Lesley Ndlovu:

Yeah. Maybe just getting to your question about what exactly we cover. In our case, we are quite flexible because our parametric insurance product is really adaptable to the needs of the clients. And generally speaking, we see three levels of need. The first and the most basic level is that a farmer that has suffered a loss of crops just wants insurance to be able to provide enough food for him and his family to get to the next season. So then this will be the lowest sum insured that we would consider.

The second level will be a farmer that’s looking to also replace the inputs that they’ve utilized for that farming season. So seeds, fertilizer, and so forth. And to your point, this is the amount that is usually tied to a loan because you have some companies that specialize in agricultural production. So at the start of the season, they will give the farmers inputs on credit and the farmer will then repay those inputs at the end of the agricultural season. So then this is what is usually linked to the financing element.

And then at the third level you see farmers that are looking to replace their revenues. So the farmer has already calculated that he would’ve made a certain level of money from crops in that particular season and they’re looking for insurance to replace this revenue. And at the three levels, the sum insured is different. And while the rate online may be the same, the premium that the farmer will pay will then also reflect the size of the coverage that they’ve taken out. And intuitively, the higher the premium you pay, the higher the claim you’re going to be receive. This is how we manage it.

Shaun Tarbuck:

Lovely. One more question to issue before we close. Lesley, I would’ve thought your challenge be around what you call the political engagement. How do you manage that governance level on the macro piece?

Lesley Ndlovu:

That is a very good point that you make because, as you may have seen from the map that we have shown, there are 55 countries in Africa, but only around 14 reliably use insurance. And the reason why is twofold. Firstly, it’s around affordability of premiums because African governments have to make the trade off between paying for insurance premiums and spending money on other items such as defense, health, infrastructure, education and so forth. A million dollars that is spent on premiums is a million dollars that’s not available to stock a clinic or to provide for education. So there are real trade offs that have to be made at the national level.

The second reason is around just knowledge of in insurance, because then the benefits of insurance are not universally known or understood. And as you’ve indicated, there might not necessarily be the political willingness within the country. The way we overcome these barriers is that when it comes to the affordability of premiums, last year at Core 26, we raised $100 million for a fund to subsidize insurance premiums. We believe that this will encourage more countries and more entities to really think about insurance in their financing mix for natural disasters.

And then when it comes to the second point around knowledge and appreciation of insurance, this is through political engagement at the highest levels of the government, it’s through advocacy at the various forums. And it’s also capacity building, helping the governments understand how much risk they’re exposed to and the options that they have for managing that risk. And all of these, it’s a continuous process, which is essential when you are building a market that doesn’t exist.

Shaun Tarbuck:

That’s fabulous. I’m sure that political engagement is a skill that most CEOs don’t have, because they don’t need it. You definitely need it. Just lastly, turning to CLIMBS and IBISA. You talked about the number of different partners you had engaged, and from your presentation to me it strikes me as if anyone that’s involved in farming, not necessarily in emerging countries, would benefit from a solution like this, on the parametrics side, that this isn’t just emerging country.

So maybe you can tell us how you’ve managed to pull the various stakeholders together. Because obviously you’ve got the two of you, you mentioned Global Parametrics, I know Ensure Resilience is helping with some of the funding. I know you get some data from Data Science, as well. So how difficult is it to do a project or initiative like this?

Dorien Asampana:

I would say that the most essential partner in all of this for us is claims, is the underwriter and the one who can do the last-mile distribution. I think also, from what Leslie said, that is just a piece that is very difficult to do for many more international organizations like IBISA. So I think as long as that one is in place and they’re as passionate as CLIMBS to make a difference in this field, I think the rest will follow. And like you said, there are many that can benefit from this kind of parametric solution, mutuals, but also banks, but also food and beverage companies that, when they source from certain countries, that are also faced with weather risk. And I think along the whole chain there’s a huge need that mutuals also can tap into.

Shaun Tarbuck:

Thank you. Anybody have any comments at all?

Noel Raboy:

And to add that also is I think the mutual trust, especially the help also of ICMIF, with you, Shaun, and this kind of project, it should be something that we can duplicate or triplicate maybe in other countries. There are a lot of learnings and, in fact, with this pandemic, I think this is positive. Not the COVID positive, but a positive result on technology and using technology may be a solution in this climate crisis that we have.

Shaun Tarbuck:

Thank you very much. And a real big thank you to all of you. You’ve been fantastic. You’ve answered the questions brilliantly. So just to bring us home, these recordings and transcripts are available on the ICMIF webinar websites. So you can see those exclusively for the ICMIF members. And finally, just a reminder, if you haven’t registered already, along with the other 400, yes, 400 registered for the ICMIF conference, a world record for us by a long way, you’ll be able to see Noel and Lesley at the conference, maybe not Dorien, but we’ll certainly have an IBISA representative there. They’ll be presenting, you’ll be able to talk to them in more detail. It’s all about the networking as well as the inspiration when we come to conference. So I do hope we’ll see you there in the next few weeks. And thank you very much, once again, to all of you. That was an excellent session. Thank you.

Noel Raboy:

Thank you, Shaun. Thank you, Dorien. Thank you, Lesley.

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