Blue Marble Microinsurance (Blue Marble) is working with coffee company Nespresso on a pilot program to deliver weather index insurance to smallholder coffee farmers in Colombia.
The pair note that due to climate change producers of coffee are particularly exposed to weather variability and extremes, resulting in a need for risk transfer solutions to assist them by protecting their livelihoods.
With a lack of suitable insurance coverage options and “immense risk” to coffee crops due to “unpredictable and adverse weather conditions” the pair have launched a pilot program to deliver an efficient and parameterised risk transfer solution.
The solution is designed to “enhance the welfare of coffee farmers and address supply chain risk.”
1,975 smallholder coffee farmers are participating in the pilot, on coverage across 5,724 hectares belonging to the farmers of the Aguadas and Norte de Caldas cooperatives in Caldas, Colombia.
The pilot project is the result of a collaboration between the farmers, Nespresso coffee specialists and Blue Marble entities. The weather index insurance product will offer farmers tailored coverage against excess rainfall and drought during the developmental stages of coffee crop growth, when the plants are most susceptible to climatic shocks.
“This pilot initiative helps to establish a support mechanism for smallholder coffee farmers in Colombia so that they can continue to thrive in the face of climate change,” explained Guillaume Le Cunff, President and CEO of Nespresso USA. “Nespresso is truly grateful for Blue Marble’s partnership in developing this vital initiative for smallholder coffee farmers, whom we work closely with and rely on to grow and harvest the world’s highest quality beans.”
“Our changing climate poses serious threats to the livelihoods of coffee producers, especially smallholder farmers,” commented Joan Lamm-Tennant, Chief Executive Officer and Founder of Blue Marble. “Insurance provides these farmers with critical safety nets, and it can have a lasting impact. Blue Marble is proud to work with Nespresso to help mitigate risk and create value in the lives of these farmers.”
“Having an insurance solution that protects our members from the devastating effects of climate change is critical for the cooperatives,” added Cesar Julio Díaz, Head of the Aguadas and Norte de Caldas cooperatives. “It allows coffee growers access to economic resources in the form of insurance payouts that will help them re-establish their crops, making them productive and able to continue with their agronomic activity.”
Satellite technology is used to derive the data required to create the weather indices against which the parametric policies can be triggered.
Should there be an occurrence of excess rainfall or drought in a covered area, payments can be made automatically and very quickly without the need for time-consuming claims assessment.
The design parameters for the pilot program have been validated by the farmer policyholders based on their knowledge and historical yields, the announcement said.
It’s hoped that the program can be expanded over time, with The National Federation of Coffee Growers of Colombia (FNC) expressing an interest in extending the coverage to other coffee regions.
Additionally, the program features are set to be refined over time, to ensure scalability of the product in the future.
It’s another innovative use of parametric insurance based on actual weather variables, providing coverage that will payout at the time the smallholder needs the financial liquidity and support, with rapid payments possible thanks to the automated and data driven triggers.
Products of this kind can go a long way towards narrowing protection gaps impacting lives and livelihoods and are a great example of the insurance and reinsurance industry driving solutions to help the world’s poorest, while generating new opportunities for deployment of capacity at the same time.