Global Parametrics & JBA design parametric flood cover for VisionFund

Global Parametrics, the parametric and index-based disaster risk transfer company, has partnered with risk modelling specialist JBA Risk Management to design a parametric flood insurance product for VisionFund to cover flood risks in Myanmar.

VisionFund International is a division of global charity World Vision and oversees its microfinance operations, providing loans and insurance to farmers and low-income families.

VisionFund and Global Parametrics have partnered before, to arrange parametric insurance to underpin the innovative recovery lending programme operated by the charity.

This time the pair have come together to solve a unique issue in Myanmar, where recipients of VisionFund loans have been impacted by flooding and it was found that this financing was often spent on flood recovery, rather than improvements to agriculture practices for which they had originally been intended.

VisionFund wanted to create a way to deliver a more effective and swift recovery from floods, by offering recovery loans backed by capital and credit when a major catastrophe occurs.

Hence teaming up to design a parametric insurance solution that can ensure the capital is readily available after a disaster strikes, to ensure liquidity for those recipients of its loans that are hardest hit.

Global Parametrics teamed up with flood risk modelling specialists at JBA Risk Management to develop a parametric risk transfer solution for Myanmar flood risk to support the farmers. Funding was partly provided by The UK’s Department for International Development, which has also supported the Global Parametrics managed Natural Disaster Fund (NDF).

“Global Parametrics is a unique solution provider in the development of disaster risk management and is able to quickly customise and implement recovery systems that are both effective and responsive,” Malcolm Haylock, Head of Risk Modelling, Global Parametrics explained. “Historical, forecast and real-time flood data was critical to the success of this programme. It had to be consistent and reliable – which was why we chose to work with the global flood experts, JBA.”

JBA provided tools and data to enable the analysis of historical flood events and also to monitor and report on live flood disasters, enabling both a long-term view of the risk to be established and parametric triggers to be designed.

The solution enables Global Parametrics to ascertain when parametric triggers are breached and to ensure timely payouts to the farmers if the parametric flood insurance is triggered.

As a result, VisionFund International could provide an insurance solution to Myanmar’s farmers that is tightly linked to their experience of flooding, ensuring timely recovery payments are able to be made meeting its goal of helping farming communities to recover, and even thrive, through innovative disaster recovery lending programmes.

This parametric risk transfer solution was first implemented in May 2020, we understand, but only came to light recently.

This type of parametric solution is highly applicable alongside microfinance, as they offer a way to provide vulnerable, poorer communities with valuable funding post-event, when loans might default as a result of extreme weather.