By Samdarshi Vikram Singh, Vice President, Government Business Group, Future Generali India Insurance Company Ltd, India

An increase in heat stress will cause productivity losses in India equivalent to 34 million full-time jobs by 2030 (a loss of 5.8% total working hours): Swiss Re Institute, 2022.

The tailor-made structural offering under parametric insurance represents significant advantages with complete customisability pre-agreed payouts based on benchmarks/triggers to meet specific risk requirements of a customer and offer faster relief to customers without a lengthy manual survey process for loss assessment.

The offerings under parametric insurance cover can be extended to temperature, rainfall, wind speed, and humidity etc., it can cover any predefined parameter where a scientific correlation to a loss for an underlying asset can be built with a predefined benchmark/trigger like Cyclone, Earthquake, Floods etc.

Customers here are automatically compensated once a predefined benchmark/trigger is breached based upon the data provided by an agency (which is mutually agreed between the customer and insurance provider) and a predetermined payout is settled which was agreed at the time of product offering. The faster-paying mechanism enhances the financial resilience of the people insured.

Future Generali India Insurance company has recently offered parametric coverage for three of the rural assets under the Weather Index-based parametric insurance.

1. Cattle (Ernakulam Milk Producers, MILMA) – Heat above a particular temperature for different geographies can reduce milk production in Cows/Buffaloes by up to 30%. With increasing heat waves due to climate change, dairy owners experience losses due to lower milk yield and increased operational costs.
2. Poultry (Srinivasa Farms) – Heat above a particular temperature for different geographies can reduce the quantity/quality of eggs and meat yields.
3. Shrimp (CIBA) – Cold Wave and Temperature Swing covers are offered to cover shrimp health (Low temperature causes vulnerability to infection) and growth to achieve the required size and weight.

The primary customers for parametric insurance for dairy, poultry and aquaculture to ensure financial stability can be:

1. Small to Medium Dairy, Poultry and Fishery Farms: These farmers are often the most vulnerable to extreme weather conditions and may have limited resources to manage sudden financial losses. Parametric insurance offers them an affordable and efficient safety net.
2. Cooperatives and Unions: In regions where small farmers are organised under cooperatives, these entities can purchase parametric insurance on behalf of their members to spread risk and protect the supply chain.
3. Financial Institutions and Agribusinesses: Banks and financial institutions that lend to the agricultural sector can use parametric insurance to protect their portfolios by encouraging or requiring farmers to adopt such coverage.

Disclaimer: The views expressed in this piece are those of the author/s and do not necessarily reflect the views or policies of AIDMI.