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Weather Index-Based Parametric Insurance for Small-Scale Fishers

Weather Index-Based Parametric Insurance for Small-Scale Fishers

Project Leads: Rare and WTW
Support: United Kingdom’s Blue Planet Fund

Summary 

To combat fishers’ income losses from adverse weather, ORRAA partners Rare and WTW are designing and exploring the feasibility of a parametric risk transfer solution for fishers in the Philippines that is indexed to wind speed, sea state, and rain conditions which prevent safe fishing. The coverage will be an affordable, scalable product that provides payments to fishers when the policy is triggered. The policy will also require that fishers formally register and commit to sustainable fishing practices. 

Challenge 

In the Philippines, 6.5 million people rely on local fisheries for income and sustenance, with fish and fish products making up 11.5% of the average Filipino diet. However, fishers’ ability to access fishing grounds depends on prevailing weather conditions. High winds, agitated sea state, and heavy rain, which reduces visibility, all negatively impact the activities of small-scale fishers who use smaller vessels and navigate using visual cues. Seasonal winds and rains are changing and becoming increasingly unpredictable due to climate change. Fishers suffer significant income losses when they are unable to work for a prolonged period due to adverse weather.

Solution

To combat these losses, support resilient communities, and manage risks in the face of climate change, ORRAA partners Rare and WTW are scoping a parametric risk transfer product for fishers in the Philippines that is indexed to wind speed, sea state, and rain, combined so that they capture conditions which preclude safe fishing. As envisioned, the coverage will be an affordable, scalable product that provides payments in Philippine pesos to fishers when the policy is triggered by a set index which proxies the aggregate number of lost fishing days each month. 

As envisioned, the Government of the Philippines will be the policyholder and provide the coverage to fishers as a benefit for fisher registration. Registered fishers must also commit to implementing sustainable fishing practices. 

Scalability and Next Steps

After demonstrating feasibility and completing an implementation strategy, the project aims to pilot the product across 75-90 coastal municipalities as proof of concept. The pilot is targeting 50% market penetration in an area with approximately 100,000 fishers. It is currently anticipated that the maximum pay-out will be up to US$100 per fisher per month. This number is approximately equivalent to a month of lost wages and was calculated from Rare’s 2019 survey data of over 4,000 fisher households, which found the average monthly income was US$98 per month.