LM Re and Britam partner with insurtech to protect Kenyan coffee from climate risks

Parametric insurance has grown in popularity in recent years, with the World Economic Forum recently describing it as a potential “game changer” for mitigating disaster risk

ANALYSIS | AGENCIES | Liberty Mutual Reinsurance (LM Re) has partnered with Kenyan financial services provider Britam and farming-focused insurtech Sprout to offer a parametric insurance product to Kenyan coffee growers.

The product is the first of its kind in the Kenyan coffee market, according to LM Re. The policies are funded by global coffee buyers, helping to ensure a stable supply. They are underwritten by local insurer Britam and monitored by Sprout, which uses satellite data and machine learning to monitor risks stemming from climate and weather. LM Re supports the initiative by shaping the coverage structure and the capacity allocation.

The policy is parametric, meaning payouts under the scheme are triggered when adverse weather events reach a certain metric, such as a category five cyclone, rather than proof of individual loss or damage of crops.

This allows farmers to access funds more rapidly in the event of disasters like drought or flood, and lowers costs for the insurance provider, as it is not required to send auditors to assess the damage for each individual farm.

San Francisco-headquartered Sprout will also provide real-time advice to farmers, allowing them to adapt farming practices based on weather forecasts, which it says will further increase their resilience to climate-based risk.

“This coffee product is a catalyst to unlock production potential and climate financing options for smallholder farmers in Kenya,” says Sprout CEO Ashley King-Bischof. “Partnering with LM Re allows us to deliver a robust product and support farmers when they need it most.”

Parametric insurance has grown in popularity in recent years, with the World Economic Forum recently describing it as a potential “game changer” for mitigating disaster risk.

Last year, the head of underwriting at Africa Speciality Risks Raveem Ismail, told GTR that parametric insurance is an important innovation for smallholders, who often find traditional insurance products hard to access because the cost of maintaining a labour-intensive claims infrastructure is difficult to cover from the premiums paid.

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Source: Global Trade Review