Insurance solutions being used in the Caribbean

A new insurance solution is demonstrating how communities on islands in the Caribbean can effectively protect themselves from the impacts of climate change.

In January 2014, a new insurance product that people can use to safeguard against the impacts of climate change came onto the market in Grenada: the Livelihood Protection Policy (LPP). Trans-Newmil, the insurance provider, sells the LPP along with the Grenada Co-operative Bank and Greenville Co-operative Credit Union. The policies are targeted specifically at low-income households, for example those of small-scale farmers, so that they can insure their crops and expected harvests against weather-related damages. Within the context of a three-year project, the International Climate Initiative (IKI) is promoting the development and introduction of an insurance solution for vulnerable segments of the population. The Munich Climate Insurance Initiative, which includes participation by the United Nations University in Bonn and Munich Re, is implementing this project.

On the neighbouring island of St. Lucia, the LPP has already been available since June 2013. Just a few months later, it demonstrated its usefulness when a strong storm brought heavy rainfall as it crossed the island on 24 and 25 December. The LPP is an index-based insurance product, which means that payouts are made as soon as a set threshold is exceeded or fallen short of, in this case, a certain level of rainfall. This benefited the policyholders in St. Lucia, because the first premiums were paid out shortly after the extreme weather event. One policyholder, Walter Edwin, expressed satisfaction with the payment, saying: 'I will continue to encourage persons to purchase this policy.' Thanks to the payouts, he is now in a position to compensate for the damage that was caused and to invest once again in the cultivation of agricultural products.