Igloo, a regional insurtech, is expanding its blockchain-based parametric index insurance to coffee farmers in Southeast Asia (SEA), aiming to provide innovative weather insurance solutions to protect the multi-billion dollar coffee industry.
The region, known as the coffee belt, is a major global coffee producer. While Vietnam and Indonesia dominate coffee output, the Philippines is also a significant player, with projected industry revenue of$6.7 billion in 2023. The local coffee market is expected to grow annually by 5.69% until 2025.
Coffee production is a long-term and labor-intensive investment that faces constant threats from climate hazards, leading to challenging growing conditions and disrupting supply chains. To address these challenges, Igloo introduced Weather Index Insurance, initially targeting rice farmers but recognizing its scalability to cover other sectors like coffee farms, which are experiencing robust growth in the region.
The existing insurance products for coffee farmers suffer from a common problem: they are incompatible with the real and frequent risks faced by these farming communities. The assessment process for damages is complex and time-consuming, posing financial hardships for farmers.
Weather Index Insurance
Weather Index Insurance eliminates the need for individual claim verification, reducing transaction costs and enabling faster payouts by utilizing rainfall data to calculate claims based on pre-assigned values for losses caused by natural events. The use of a public blockchain for hosting the business rules governing claims payout ensures transparency, consistency, and unbiasedness, enhancing the credibility of the system.
While Weather Index Insurance is currently available in Vietnam for rice and coffee farmers, Igloo plans to expand its coverage to more countries in Southeast Asia, including the Philippines.
Given the Philippines’ position as an agricultural powerhouse and its higher vulnerability to climate change impacts, Igloo believes that Weather Index Insurance will greatly benefit the country. Igloo is collaborating with partners to make this product available in the Philippines and other markets in the near future. Additionally, they are exploring the possibility of extending coverage to include other indices such as earthquakes.