Coffee farmers in Vietnam hit by low rainfall receive insurance-backed payout

Coffee farmers in Vietnam who suffered losses due to low rainfall during the 2024 coffee growing season have received their first ever payout from WTW and Global Parametrics, as part of a program co-funded by the UK and German governments.

In early 2024, WTW placed the parametric solution with Bao Minh Insurance Corporation in Vietnam, protecting coffee farmers’ revenue against a lack of yield due to low rainfall during the critical flowering period. The solution uses satellite data to measure rainfall levels in the country’s coffee-growing regions. If the rainfall dips below predefined values, the insurance is triggered and the farmers receive payouts without the need for lengthy claims processes or on-the-ground assessments.

Risk capacity to support the payouts is provided by the Natural Disaster Fund, a public-private partnership managed by Global Parametrics, a subsidiary of CelsiusPro Group specialising in parametric protection against climate and natural disaster risks. The Natural Disaster Fund is funded by the UK government’s Foreign, Commonwealth and Development Office and Germany’s development bank KfW.

Claire Wilkinson, Managing Director at WTW, said: “This programme supports the resilience of coffee farmers in Vietnam against the impacts of an increasingly volatile climate, giving them much-needed financial support and allowing them to recover quickly when adverse weather threatens their livelihoods.”

Vietnam is the world’s second largest coffee producer, with coffee playing an important role in the country’s export economy. However, coffee production is highly sensitive to weather conditions, especially rainfall and temperature. This risk transfer solution provides a safety net for these farmers, ensuring that they can continue their operations even in times of drought.

“We are delighted that the parametric cover has effectively protected coffee farmers in Vietnam,” said Angus Kirk, Chief Executive of Global Parametrics. “Many of these farmers operate on a small scale with limited financial resources, which constrains their ability to cope with the impact of deviations in rainfall and temperature patterns on their crops. We look forward to continuing our work with our partners in Vietnam.”

The Coffee Climate Protection Insurance (CCPI) programme was developed by WTW and Global Parametrics as part of the wider ‘De-Risk South-East Asia’ initiative in partnership with ECOM Agroindustrial Corporatiom, Bao Minh Insurance Corporation and the University of Southern Queensland in Australia.