Enhancing resilience of small-scale farmers across Southeast Asia
Leading Japanese insurance company Sompo Japan Nipponkoa Group joined 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 changes adverse impacts by offering financial services to low-income farmers.
Established in 1888, Sompo Japan Nipponkoa Group offers a range of financial services worldwide. The Group expanded its portfolio to offer products and services that mitigate and adapt to climate change as the first financial institution in Japan to establish a department dedicated to environmental issues in 1990.
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 2012 drought were a major factor in the businesss rapid growth.
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 and in order to better understand the benefits of this inclusive business.