Providing weather index insurance in Thailand
Sompo Japan Group has developed a Weather Index Insurance scheme for farmers in northeast Thailand as an option for adaptation. Since 2007, Sompo Japan Risk Management and the Japan Bank for International Cooperation have been jointly studying risk finance schemes that utilize insurance, identifying weather index insurance as the most effective scheme.
Most farmers in north-east Thailand, where there is a shortage of water resources, rely on rainfall. As a consequence, harvests can fluctuate greatly depending on meteorological conditions. The development of the weather index insurance requires highly reliable long-term meteorological data. Khon Kaen Province has relatively precise meteorological weather stations, making it a suitable target for product development. Insurance coverage as well as penetration rates are low - Thai farmers are unfamiliar with insurance and struggle to pay back loans taken for agricultural equipment. In response, Sompo Japan decided to develop a new scheme to sell an insurance product with loans from Thailand’s Bank for Agriculture and Agricultural Cooperatives (BAAC). Between April and June 2008, Sompo Japan made a trial product, prepared fliers in Thai for the product, and conducted interviews with local farmers. BAAC expects the product to succeed; in May 2009, a simulation for full-scale product development was started and Sompo Japan launched the product in 2010.
As a result of the simplicity of the product, where insurance is paid out according to the observed result of accumulated precipitation, the product has been rated highly by farmers in Thailand. The insurance has sold above the target of 1000 subscriptions. More information about this product can be found in the links below:
Articles and reports:
Asia Insurance Review article, August 2010
Corporate Social Responsibility communications
Weather Index Insurance for drought risk in Thailand - presentation
Weather Index Insurance for drought risk in Thailand - news release
Weather Index Insurance sales results July 2010
Asia Insurance Review article, January 2011
Conferences and presentations:
OECD conference presentation: financial management of large-scale catastrophies - presentation 2009
Information about OECD conference: financial management of large-scale catastrophies
Involvement with the development of ISO 26000
Sompo Japan Insurance was closely involved with the development of the ISO 26000 standard on social responsibility, in particular section 6.5.5 on climate change mitigation and adaptation.