Coffee farmers in Kenya are poised to benefit from an insurance product developed to protect them against climate risks such as drought.
The parametric insurance product which was launched yesterday by Liberty Mutual Reinsurance (LM Re), part of Liberty Mutual Insurance Group in partnership with insurtech firm Sprout Inc. and the Kenyan insurer Britam, aims to protect Kenyan coffee growers from financial losses due to drought.
According to Jean-Christophe Garaix, head of Agriculture and Parametrics, Liberty Mutual Re, the launch is testament to insurer’s commitment to providing innovative insurance solutions that empower local communities in emerging markets to be more climate resilient.
“Partnering with Sprout allows us to combine our reinsurance expertise with their deep understanding of agricultural needs, resulting in a product that offers tangible benefits to Kenyan farmers and provides a stabilizing effect for the local economy,” said Garaix in a statement.
Developed in the Lloyd’s Lab innovation accelerator, the product is triggered by specific weather events and provides swift payouts and immediate financial support to mitigate the risks of crop failures.
Leveraging technology-driven insurance solutions
Building on its expertise in technology-driven insurance solutions for the agricultural sector, Insurtech Sprout utilizes satellite data and machine learning to analyze historical weather patterns. This empowers farmers to maintain productivity even in the face of climate challenges. LM Re has been a key supporter from the outset, helping to shape the coverage structure and allocate capacity.
This product is tailored not only to mitigate climate risks but also to meet the specific needs of coffee growers. It includes real-time advisory services that guide farmers in adapting their practices based on weather forecasts, thereby strengthening their resilience.
In an innovative approach, global coffee buyers fund the coverage premium, supporting local operations while reducing operating costs for Kenyan farmers. LM Re explains that this model ensures farmers can swiftly recover from adverse conditions, safeguarding their livelihoods.
By keeping financial resources within Kenya and supporting local agriculture, this new insurance product aims to strengthen the local economy and promote sustainable farming practices, providing a vital safety net for farmers facing increasing climate variability.
The product is launched in collaboration with Kenyan insurer Britam, aligning with regulatory and industry efforts to close the insurance protection gap and offer more comprehensive coverage options for local farmers.
Catalyst to unlock production potential
according to Ashley King-Bischof, CEO of San Francisco-based Sprout, the coffee product is a catalyst to unlock production potential and climate financing options for smallholder farmers in Kenya. Partnering with LM Re allows Sprout to deliver a robust product and support farmers when they need it most.
On his part, Tom Gitogo, managing director and CEO of Britam Group, the Nairobi, Kenya-based financial services group said that as part of their sustainability strategy, the financier aims to champion innovative microinsurance solutions that not only safeguard vulnerable populations, such as small-scale farmers, from climate risks but also deepen financial inclusion among the low-income population.
“These emerging risks are underserved in the market and to address this gap, Britam partners with local and global organizations to develop innovative solutions,” said Gitogo.
