Smallholder farmers in Malawi will benefit from an insurance payout to Tearfund of USD 100,000 (approximately £80,000). This payout is the result of an innovative parametric product, which leverages satellite data to determine the availability of water for crops.

When the level of soil moisture falls below a pre-agreed threshold in a defined timeframe, the payout is triggered without the need for loss estimations. This provides fast, transparent and reliable financial relief for farmers who would otherwise see their yields at risk, threatening communities with extreme hunger. The payout helps farmers proactively take measures that improve food security for their communities.

Elizabeth Myendo, Tearfund’s Regional Lead for Southern and Eastern Africa, said: “We are preventing a hunger crisis before it takes hold. This insurance payout will preemptively support 1,200 households with drought tolerant crops (such as sweet potato vines and cowpeas) and high value horticultural crops (such as tomatoes, aubergines and onions). It is a key tool in tackling malnutrition.”

In a bold new move to protect communities who are vulnerable to extreme weather events fuelled by climate change, this new, previously untapped source of financing promises to reduce the impact, scale and the cost of humanitarian crises. It comes in the form of an innovative risk transfer product, developed by Global Parametrics (a CelsiusPro Group company) and funded through a premium subsidy from Humanity Insured, a UK registered charity backed by the insurance sector.

The way the payout will be spent and choice of seedlings to invest in has been agreed inline with the Malawian Ministry of Agriculture recommendations and in consultation with Tearfund’s partner organisation, Eagles, as well as agricultural experts who monitor market value to help farmers make smart choices about what to grow to both feed their families and earn a living.

“If the rains had not come at all, the insurance package could have also been positioned to provide emergency food supplies to help families through a period of extreme hunger,” explains Myendo. “Teaming up with Global Parametrics and Humanity Insured enables us to ensure that the long term work we are doing in partnership with local churches and communities around the world, helping people adapt to the effects of climate change, is better protected. The flexibility and varying levels of support the product offers means the people we work with will be more resilient to setbacks caused by extreme and unpredictable weather events.

“Tearfund, Global Parametrics and Humanity Insured, have together built this solution that will also be used in Nepal, Pakistan and Ethiopia as well as Malawi, focusing on protecting low income families vulnerable to severe drought. We hope to go on to protect communities against excess rainfall, tropical storms, heatwaves and other types of disaster too.”

Tearfund’s Country Director for Pakistan, Jonathan Johnson, said: “It’s clear that the gap between the cost of global disasters and the finance available to respond to their impact is growing. People cannot depend on traditional models of aid, which can be slow to flow through to those at the sharp end when extreme weather events take hold. People at risk of extreme drought and famine must have fair access to insurance.”

The risk capacity is provided by the Natural Disaster Fund (NDF) a disaster risk financing vehicle managed by Global Parametrics and funded by the UK government’s Foreign, Commonwealth and Development Office and by Germany’s development bank KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ). The product is developed with a catalytic grant provided by the NDF Technical Assistance Facility, funded by KfW on behalf of BMZ.

Mark Rüegg, CEO of CelsiusPro Group said: “We are delighted with our partnership with Tearfund and Humanity Insured on this drought solution to support the resilience of smallholder farmers. This collaboration between the humanitarian, development and insurance sectors accelerates climate resilience and food security.”

Charlie Langdale, CEO of Humanity Insured, commented: “This exciting new partnership with Tearfund is delivering critical services that help shield vulnerable communities from disasters. This innovative insurance solution not only protects families from the immediate impacts of drought but strengthens their long-term resilience, by restoring certainty and financing recovery.”

“Using satellite triggered insurance, money reaches those in need quickly, preventing disasters from becoming crises, and allowing people to manage climate shocks. With this safety net in place, we create a virtuous cycle of prosperity, allowing families to focus on their future—investing in everything from education to climate-resilient farming practices.”

This new insurance-based solution is just one of the ways that Tearfund is collaborating with the insurance industry to harness new technologies and digital tools to the benefit of the world’s most climate vulnerable communities. Tearfund is also working with partners in Ethiopia to develop new digital technologies to support farmers in remote locations.

“Our aim is to disseminate early warnings of extreme weather events and offer practical advice, sent via voice notes in local languages, on how to protect livelihoods. We are also trialling a specially designed mobile app that will link small-scale farmers to parametric insurance packages to protect themselves and their communities against major losses in the event of extended droughts. Ultimately, there cannot be climate justice without fair, affordable and accessible insurance for the most vulnerable,” said Elizabeth Myendo.