Swiss Re plays key role in IDF programme to protect climate vulnerable farmers in Mexico
In Mexico, over 80% of total economic losses from weather-related disasters in the last two decades occurred in the agricultural sector. Today the IDF announced the launch of a project to develop a sovereign parametric insurance solution for climate-vulnerable smallholder farmers in Mexico under its Tripartite Programme with BMZ and UNDP. Swiss Re is honoured to be part of this public private partnership.
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Led by IDF members AXA Climate, Guy Carpenter, Munich Re and Swiss Re, the public private partnership includes Mexican state-owned re/insurer Agroasemex as a key local partner for the national insurance programme. Puerto Rican Insurtech Raincoat will provide the insurance platform and during the project roll-out phase the local market will be invited to participate in the program.
The Mexican Ministry of Finance & Public Credit and the Ministry of Agriculture strongly support the development of this insurance scheme which will focus on ensuring that insurance payouts will reach farmers directly and rapidly to mitigate the impact of natural disasters.
This is the first country project to be launched in 2022 under the Tripartite Agreement announced in 2019 between the German Federal Ministry for Economic Cooperation and Development (BMZ), the IDF and the United Nations Development Programme (UNDP) during the United Nations Secretary General’s Climate Action Summit.
In Mexico, over 80% of total economic losses from weather-related disasters in the last two decades occurred in the agricultural sector. Smallholder farmers are hit hardest as they practice rain-fed agriculture and have less access to technology, formal credit and commercial agricultural insurance.
Since the Mexican government’s subsidised CADENA programme to insure smallholder farmers was discontinued in 2020, around 3.5 million smallholder farmers have been left without protection against extreme weather events. This new public private partnership has the aim of improving the resilience of currently uninsured smallholder corn farmers to extreme drought and rainfall events.
This innovative solution makes use of insurance as an efficient means of enhancing social protection for low-income farmers. Serving as a role model for other countries, the project is expected to have positive spin-offs by facilitating access to finance and tailored weather forecasts for the smallholder farmers covered, as well as other social protection schemes through for example, increased mobile phone penetration, inclusive enrolment processes and women empowerment measures. These types of disaster risk reduction measures are expected to help build farmers' resilience beyond the benefits of insurance.
The InsuResilience Solutions Fund (ISF), managed by KfW Development Bank on behalf of BMZ, will co-fund the implementation of the programme alongside the IDF insurance industry members. The Frankfurt School of Finance and Management (FS) which manages the ISF, today signed a grant funding agreement with the IDF insurance industry project consortium partners.
After an intensive work period between IDF, ISF and the Mexican Government, the Grant Agreement was finally signed. Funds from the ISF will allow the implementation of an innovative insurance scheme in Mexico to protect smallholder farmers cultivating corn against the impact of climate events. The new insurance programme will be jointly designed by the re/insurance companies AXA Climate, Munich Re and Swiss Re, the reinsurance broker Guy Carpenter, as well as the Puerto Rican InsurTech Raincoat
