Lloyd’s of London, the UK Met Office, and reinsurance broker Guy Carpenter are working together to establish the concept of an agriculture weather index that can be used for insurance in Southeast Asia, with a report on the initiative set to be launched in London later this year.
Following a commitment to strengthen and improve catastrophe resilience across Asia, between the British government, the Lloyd’s of London specialist re/insurance marketplace, and the Monetary Authority of Singapore, the new initiative is the latest step in progressing disaster resilience efforts in Asia.
Home to some of the most vulnerable regions and societies in the world to the dangers of natural catastrophe events, coupled with some of the lowest insurance penetration levels globally, Asia is seen as both an opportunity and challenge for insurance, reinsurance, and insurance-linked securities (ILS) players.
A report on the new project is expected to be released by Lloyd’s of London within the next few months, so information and specific details are currently fairly limited.
However, it’s understood that the research being undertaken by Lloyd’s, Guy Carpenter and the Met Office in order to prove the concept of an agricultural weather index for insurance in Southeast Asia, will focus on Vietnam, Thailand, Cambodia and Laos.
The research comes at a time when drought conditions in parts of Asia are some of the worst seen for the last 20 years, underlined by Thailand, Laos and Cambodia recording all-time national high temperatures, of up to 44.6°C (112°F).
The resulting drought, intense heat and water shortages have claimed lives of both people and animals, disrupted schools, and destroyed crops in parts of Southeast Asia.
Furthermore, reports highlight how the Mekong River, which is the longest river in the whole of Southeast Asia, passing through Thailand, Cambodia, Laos, and Vietnam, has actually fallen to its lowest level since records began almost a century ago.
The collaboration of the three parties will look to demonstrate baseline risk and prediction expertise in meteorology, in order to demonstrate techniques for synthesis of crop data and high quality meteorological data, according to reports.
And, to also identify suitable indicators, and levels for triggering insurance arrangements, while fuelling debate on the development of innovative insurance solutions.
Emerging markets are widely viewed as the next source of insurance premium growth, something that was highlighted by reinsurance giant Munich Re recently.
But in order for the right solutions to be developed and utilised in emerging regions, like Southeast Asia, research and initiatives like the agricultural weather index from Lloyd’s, Guy Carpenter, and the Met Office is vital to increasing understanding, and identifying both challenges and opportunities.
Projects like this show that collaboration between the reinsurance industry and weather experts such as the Met Office, can support the establishment of solutions that address challenges and emerging risks in regions like Asia.
The development of a weather index for Southeast Asia, with the involvement of Lloyd’s, could potentially see it utilised as a tool to further the initiative started by eight Lloyd’s of London syndicates which teamed to provide $400 million of natural catastrophe insurance and reinsurance capacity to combat underinsurance.
The availability of an index, against which microinsurance products can be measured or triggered and which could then be used for reinsurance transactions, to back up the micro products, could help to enable greater capacity deployment into this emerging region.
With Lloyd’s scheduled to issue a report later this year, it will be interesting to see what developments and progression the research supports and drives, as the risk transfer world and the public sector look to improve disaster resilience efforts around the globe.