Global advisory, broking and solutions company Willis Towers Watson (WTW) has launched Asia’s first four-peril parametric insurance to protect Sri Lanka’s shrimp farms against weather risks.
The solution was designed for Taprobane Seafood Group, Sri Lanka’s largest seafood company, through a US$15 million financing project by Dutch bank FMO.
Shrimp farming is associated with a diverse range of risks and uncertainties, most prominently the exposure to weather risks across coastal regions where farms are traditionally located.
To safeguard Taprobane against such vulnerabilities, WTW’s solution covers four key weather risks: earthquake, typhoon, excess rainfall and heat stress.
As Sri Lanka’s largest seafood business, Taprobane will use the funding from FMO to rehabilitate abandoned farms, invest in new farms as well as circular tanks, hatcheries and a new processing facility.
With the parametric insurance solution, Taprobane will be able to develop sustainable shrimp farming and provide gainful employment to vulnerable communities locally, in turn enabling the growth of aquaculture in Asia and easing ongoing food security concerns.
FMO’s funding will also help to support the employment of local employees that are made up predominantly of underprivileged women, including war widows, throughout the northern and northwestern provinces of the country.
In addition to financial support, FMO has provided technical assistance to help Taprobane achieve the Aquaculture Stewardship Council (ASC) certification, which recognises companies for their responsible seafood farming practices.
The maintenance of a sustainable food system has also been challenged by the war in Ukraine and increasing extreme weather events in recent years.
In 2022, around 258 million people across 58 countries and territories faced acute food insecurity at crisis or worse levels.
Marc Paasch, global head of alternative risk transfer solutions at WTW, says: “In the face of climate change, the growing susceptibility to natural catastrophes across many Asian markets could mean that food producers based in at-risk locations can suffer adverse impact, affecting entire societies. This signifies an urgent need for innovative insurance and financing tools to better protect businesses.
“Our new four-peril parametric insurance provides an efficient and simplified solution to support businesses vulnerable to multiple weather events that are not covered by traditional insurance products in the market.”
Pieternel Boogaard, director of agribusiness, food and water at FMO, comments: “Amid challenging market conditions, the parametric structure has provided the much needed insurance protection when no traditional products were available.
“This significantly reduces the credit risk associated with the project financing, enabling FMO to play a key role in scaling local shrimp farms production, driving sustainability and economic development among some of Asia’s most vulnerable communities.”
