The President of Guatemala, Alejandro Giammattei, accompanied by the Minister of Agriculture, José Ángel López, have implemented an agricultural insurance that will protect smallholder farmers with improved practices, production of surpluses and implemented commercialization processes.
This innovative agricultural insurance is a new financial product created to protect smallholder farmers in the event of two types of climatic events: heavy rains and prolonged droughts.
The parametric and catastrophe insurance was designed by the Microinsurance Catastrophe Risk Organisation (MiCRO) for the Ministry of Agriculture (MAGA) and is operated by Crédito Hipotecario Nacional (CHN).
The head of MAGA, José Ángel López, explained that Guatemala has diverse climatic variables, and producers need to have economic resources to make up for a possible loss in their crops and empower them to be able to plant again.
Carlos Boelsterli, CEO of MiCRO, indicated that this MAGA product empowers and strengthens the most vulnerable populations, even in the most remote corners of Guatemala. This is because the insurance is not linked to other financial products (such as credit), and has an innovative compensation method that does not require the insured to be banked. Boelsterli also indicated that this approach can be replicated in other countries that are interested in improving risk management and risk transfer in the face of natural disasters.
This parametric insurance is automatically activated when an excess rainfall or drought reach agreed levels. The parameters are different for each area and the coverage periods consider the nuances of each of the country’s climatic zones.
Recognizing that insurance is only part of the solution, the product will be accompanied by financial education modules that promote holistic risk management practices.
The launch provides coverage for more than 6,000 producers, while the goal is to reach 40,000 during 2022.
The Microinsurance Catastrophe Risk Organisation (MiCRO) is a socially oriented commercial enterprise with a focus on Latin America. It is supported by Mercy Corps, the Swiss Agency for Development and Cooperation, the Climate Adaptation Platform managed by KfW and Swiss Re, whose technical assistance and risk capacity is key to providing innovative insurance protection.
MiCRO will expand activities to three additional countries
Parametric Insurance in Latin America report by Insuralex