Leading Japanese insurance company Sompo Japan Nipponkoa Group joined the Business Call to Action (BCtA) with a commitment to enhance the resilience of 30,000 small-scale farmers in southeast Asia by 2025 through its weather index insurance. The first major insurance company to join the BCtA, the Group developed this innovative initiative to mitigate against climate change’s adverse impacts by offering financial services to low-income farmers.
BCtA is a global initiative that aims to support the private sector’s efforts to fight poverty through its core business. It is supported by several international organisations and hosted by the United Nations Development Programme (UNDP).
BCtA programme manager Suba Sivakumaran stated that, “Enhancing the resilience of low-income farmers through weather index insurance not only secures their livelihoods, but promotes financial inclusion and learning opportunities at the bottom of the pyramid. This model makes Sompo Japan Nipponkoa Group unique among inclusive businesses”.
Established in 1888, Sompo Japan Nipponkoa Group offers a range of financial services worldwide. In 1990 they established a department dedicated to environmental issues and were the first financial institution in Japan to do so. The Group subsequently expanded its portfolio to offer products and services that mitigate and adapt to climate change.
Extreme weather patterns have been generating growing interest in the insurance business, particularly in developing countries where agriculture is particularly susceptible to climate impacts. Weather index insurance provides protection against crop damage resulting from climate change, promoting small-scale farmers’ self-sufficiency and improving their living standards.
This insurance pays farmers a predetermined amount of money if weather indices such as temperature and rainfall exceed certain thresholds. Unlike standard damage insurance, index insurance enables a prompt payment without a damage assessment. It is attracting particular attention in developing countries, where small-scale farmers bear the brunt of climate-related crop failures.
In 2010, Sompo Japan Nipponkoa Group launched a weather index insurance product aimed at rice farmers in northeast Thailand. In its first year, Sompo Japan Nipponkoa Thailand provided insurance to more than 1,000 rice farmers in a single province. By 2014, the program had expanded to cover 4,300 rice farmers in 17 provinces. Prompt payments to farmers in a 2012 drought were a major factor in the business’s rapid growth.
According to Kengo Sakurada, president (Group CEO) of Sompo Japan Nipponkoa Holdings, “Our Group is developing and providing products and services for climate change mitigation and adaption. We are pleased with the recognition of the Weather Index Insurance in Southeast Asia and honoured to be a part of the BCtA network. This product can be an effective tool to strengthen the resilience of farmers in Southeast Asia who are struggling from the impact of climate change. Our objective is to contribute to make the society sustainable by providing solutions to social strata vulnerable to risk while attaining sustainable growth for our Group.”
By 2020, Sompo Japan Nipponkoa Group plans to insure 10,000 rice farmers in 20 provinces of Thailand, and by 2025, it aims to serve 30,000 small-scale farmers throughout southeast Asia. The Group is planning to offer the insurance to rice and sesame farmers in the central arid region of Myanmar. There are also plans to study trends in payouts and defaults in order to better understand the benefits of this inclusive business.
Source - http://www.theguardian.com/
