WTW structures 4-peril parametric insurance for Sri Lankan shrimp farms

Broking group and consultancy WTW has designed an innovative parametric insurance solution that covers the four perils of earthquake, typhoon, excess rainfall and heat stress in Sri Lanka.

The company said that the parametric risk transfer solution covers multiple weather risks not covered by traditional insurance, which will help enable shrimp farms development in Sri Lanka.

The parametric structure was designed and placed for Taprobane Seafood Group, which is Sri Lanka’s largest seafood company.

The company needed the insurance in place to meet a critical condition to secure US $15 million in project financing from Dutch entrepreneurial development bank FMO.

Now that the parametric insurance solution is in place, Taprobane can secure the loan to develop sustainable shrimp farming and provide employment to vulnerable communities locally, helping to support the growth of aquaculture in Asia and easing food security concerns.

Marc Paasch, Global Head of Alternative Risk Transfer Solutions at WTW commented, “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 4-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 Agribusiness, Food, and Water at FMO added, “Amidst 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 in line with our updated Strategy 2030: Pioneer, Develop, Scale.”

Richard Zhang, Head of Alternative Risk Transfer Solutions, Asia at WTW also commented, “Using innovative risk analytics to underpin this bespoke parametric structure, WTW has demonstrated how we can play a critical role in ensuring that companies like Taprobane received the needed financing and insurance to protect their businesses.

“This will open the door for more sustainable seafood farming and mitigate the effects and impacts caused by climate change, which has been a challenge increasingly faced by local farms in Asia. Our unique solution will be critical to unlock the growth of aquaculture and meet the increasing food demand in the region.”