KENYA – Kenyan coffee farmers are set to benefit from a new parametric insurance product designed to protect them against climate-related risks, particularly drought.
This innovative insurance, developed by Liberty Mutual Reinsurance (LM Re) in collaboration with insurtech firm Sprout Inc. and Kenyan insurer Britam, aims to shield coffee growers from financial losses caused by adverse weather conditions.
The parametric insurance product, created through the Lloyd’s Lab innovation accelerator, is activated by specific weather events, such as droughts. It offers rapid payouts and immediate financial support to mitigate the risks associated with crop failures.
Jean-Christophe Garaix from LM Re stated: “Partnering with Sprout allows us to combine our reinsurance expertise with their deep understanding of agricultural needs, resulting in a product that offers tangible benefits to Kenyan farmers and provides a stabilizing effect for the local economy.”
Insurtech Sprout employs satellite data and machine learning to analyze historical weather patterns. This technology enables farmers to adapt their practices based on weather forecasts, thereby enhancing their resilience to climate challenges.
The insurance product not only addresses climate risks but also caters to the specific needs of coffee growers, incorporating real-time advisory services to help farmers adjust their practices accordingly.
The coverage premium for this insurance is funded by global coffee buyers, which helps support local operations and reduces costs for Kenyan farmers.
By keeping financial resources within Kenya and bolstering local agriculture, the new insurance product aims to strengthen the local economy and promote sustainable farming practices.
This launch comes as Kenyan coffee farmers work to meet certification requirements under the upcoming European Union deforestation regulation (EUDR), effective January 2025.
The EUDR seeks to reduce greenhouse gas emissions and biodiversity loss by prohibiting the sale of goods linked to deforestation. It will require detailed information about the specific locations of coffee producers and categorize countries based on their deforestation risk levels.
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