Regional insurtech Igloo said the Philippine coffee industry can benefit from its blockchain-based parametric index insurance, citing the importance of the crop in local agriculture.
Mario Berta, Igloo country manager for the Philippines, said the company is currently working with its partners to make the Weather Index Insurance available in the country.
Weather Index Insurance was launched for rice farmers in November 2022.
While Weather Index Insurance is currently available in Vietnam for rice and coffee farmers, Igloo expects to roll out the product to more countries in Southeast Asia including the Philippines soon, targeting the underinsured communities and industries.
Berta said the company is also exploring the possible expansion of the product’s coverage to include other indices such as earthquakes.
“The Philippines being an agricultural powerhouse and one that is at a higher risk of suffering from the impacts of climate change, is a country we believe will benefit from having Weather Index Insurance,” he said.
Southeast Asia is part of what is called the coffee belt and is one of the biggest coffee producers in the world.
While Vietnam and Indonesia account for the majority of global coffee output, the Philippines is also an important global producer with industry revenue expected to reach $6.7 billion in 2023, according to Statista. The local market is also expected to grow annually by 5.69 percent until 2025.
Coffee production is not only a long-term and labor-intensive investment, but it is also one that is constantly under threat of climate hazards which provide difficult growing conditions due to extreme climate—affecting farmers and disrupting supply chains.
“Weather Index Insurance is a product that we introduced in order to protect farmers and communities across Southeast Asia from unforeseen climate hazards. While initially introduced for rice farmers, we’ve seen from its success the product’s scalability to cover other sectors like coffee farms, which is one of the robustly growing segments in the region,” said Berta.
There are currently several insurance products on the market for coffee farmers. However, they share a common problem of incompatibility with the real, frequent risks faced by coffee farming families.
The damage assessment process is also complex and time-consuming, which creates the risk of additional financial hardship for farmers.
The Weather Index Insurance eliminates the need to individually verify claims thereby reducing transaction costs and enabling faster payouts to farmers. This is done by collecting and monitoring rainfall data to calculate claims using pre-assigned values for losses due to natural causes. The business rules governing claims payout being hosted on a public blockchain help leverage the attributes of transparency, consistency, and unbiasedness, thereby making the setup credible.
