Weather-proofing agriculture through parametric insurance

A partnership to design tailored and affordable parametric insurance that supports agricultural producers in the Mekong Delta to weather the region’s unique climate risks.

Context

Climate change poses significant risks to agriculture and aquaculture farmers in the Mekong Delta. As one of the world’s most extensive rice-growing regions and a major producer of fruits, vegetables and aquaculture products, the livelihoods of millions depend on the Delta’s fertile lands and water resources. However, changing climate patterns are leading to several challenges for the farmers, which will only worsen with climate change.

One of the primary risks is tied to erratic rainfall patterns, leading to more intense droughts and floods. Prolonged droughts disrupt agricultural activities, impacting crop yields and forcing farmers to face water scarcity issues. Drought can also exacerbate saltwater intrusion, which threatens the Delta’s low-lying coastal areas. Conversely, heavy rainfall and flooding can destroy crops, erode soil, and damage infrastructure.

Rising land and water temperatures further exacerbate these problems by affecting crop and aquaculture growth cycles, reducing yields, and potentially introducing new pests and diseases that were previously uncommon in the region. Finally, although typhoons rarely occur in the Mekong Delta, when they do, the impact can be catastrophic, causing extensive damage to crops, farmland, and agricultural infrastructure.

Parametric insurance can play a crucial role in supporting climate change adaptation efforts for agriculture and aquaculture farmers in the Mekong Delta, as well as combating income volatility for farmers due to weather events in rural and coastal areas.

Unlike traditional insurance, which assesses actual losses after an event occurs, parametric insurance pays out based on predefined triggers linked to specific weather or climate-related parameters. This feature makes it particularly well-suited for addressing climate risks in regions like the Mekong Delta, where extreme weather events are becoming more frequent and predictable patterns are shifting.

About the initiative

Hillridge has built an insurance platform to help farmers buy affordable climate insurance, tailored to each client‘s location. Its technology sources satellite-based weather data on a five kilometre grid to generate bespoke, automated pricing. The weather data is based on satellite imagery, making it scalable across the Mekong Delta, Vietnam and beyond to create bespoke drought and typhoon insurance tailored for each individual farm.

This partnership will:

• build on the platform to tailor parametric insurance products for the typical climate risks faced by producers in the Mekong Delta such as rice, fruit, vegetables, livestock and aquaculture
• deliver industry training and capacity building to increase industry adoption by raising awareness about climate insurance and its role in building climate resilience
• support premium purchases by female smallholder farmers and others from under-represented groups.

Key contributions from partners

• Hillridge is the lead partner project managing the partnership, tailoring its technology platform and products for Mekong Delta requirements, grower engagement and business development.
• MSIG is contributing climate insurance for droughts and bespoke solutions for smallholder growers.
• Australian Government is contributing catalytic funding support with gender expertise to strengthen social and commercial impacts, connection to an extensive network, capability building on how to capture report social impact, safeguards standards and practices, national and global recognition.

This partnership was selected through the BPP’s Vietnam Call for Climate Adaptation Partnerships in the Mekong Delta.